Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Do Chinese acquirers paying premiums in large international acquisitions experience negative market reactions as Western counterparts?

Do Chinese acquirers paying premiums in large international acquisitions experience negative... PurposeThis study draws on behavioral finance and signaling theory to investigate market reactions to Chinese acquirers when they made premium payments in large cross-border acquisitions. Paying high premiums has been considered an inferior acquisition decision that engenders negative market reactions in previous studies examining Western acquirers. Moving beyond previous work, this paper aims to propose that the premiums paid by Chinese firms in large international acquisitions will yield positive market reactions.Design/methodology/approachThis paper applies an event study method and tests hypotheses on a sample that comprises large international acquisitions made by Chinese acquirers between 2007 and 2012.FindingsThe acquisition premium paid by a Chinese acquirer in a large cross-border acquisition positively affects its stock market return to the acquisition announcement. That is, investors rely on the managers’ judgment about the synergistic and value-creating potential of the acquisitions, as inferred from the premiums paid. Moreover, it was found that the relationship between acquisition premiums and stock market returns is moderated by whether the transactions are tender offers, in that the positive relationship is weaker when acquisitions are tender offers.Originality/valueDifferent from previous research focusing on Western companies and proposing a negative linkage between premiums paid and investor reactions to the acquisitions, this study sheds light on Chinese acquirers who paid premiums in large international acquisitions and, based on the logic of behavioral finance and signaling theory, posits a positive association in the context of Chinese acquirers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Asia Business Studies Emerald Publishing

Do Chinese acquirers paying premiums in large international acquisitions experience negative market reactions as Western counterparts?

Journal of Asia Business Studies , Volume 12 (3): 11 – Aug 6, 2018

Loading next page...
 
/lp/emerald-publishing/do-chinese-acquirers-paying-premiums-in-large-international-PfBDDEE0CL
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1558-7894
DOI
10.1108/JABS-04-2016-0061
Publisher site
See Article on Publisher Site

Abstract

PurposeThis study draws on behavioral finance and signaling theory to investigate market reactions to Chinese acquirers when they made premium payments in large cross-border acquisitions. Paying high premiums has been considered an inferior acquisition decision that engenders negative market reactions in previous studies examining Western acquirers. Moving beyond previous work, this paper aims to propose that the premiums paid by Chinese firms in large international acquisitions will yield positive market reactions.Design/methodology/approachThis paper applies an event study method and tests hypotheses on a sample that comprises large international acquisitions made by Chinese acquirers between 2007 and 2012.FindingsThe acquisition premium paid by a Chinese acquirer in a large cross-border acquisition positively affects its stock market return to the acquisition announcement. That is, investors rely on the managers’ judgment about the synergistic and value-creating potential of the acquisitions, as inferred from the premiums paid. Moreover, it was found that the relationship between acquisition premiums and stock market returns is moderated by whether the transactions are tender offers, in that the positive relationship is weaker when acquisitions are tender offers.Originality/valueDifferent from previous research focusing on Western companies and proposing a negative linkage between premiums paid and investor reactions to the acquisitions, this study sheds light on Chinese acquirers who paid premiums in large international acquisitions and, based on the logic of behavioral finance and signaling theory, posits a positive association in the context of Chinese acquirers.

Journal

Journal of Asia Business StudiesEmerald Publishing

Published: Aug 6, 2018

References