Substantial takeover of shares and post-acquisition performance
Journal Title: UNKNOWN - Year 2015, Vol 3, Issue 2
Abstract
The corporate restructuring is used as mechanism to create value of the shareholders. It gives opportunity to make investment in other company with high potential but lower rate of return. By taking over such companies, the acquiring company redeems profit and creates value for their shareholders without diluting their right and altering main business operations. However, the value of acquired company shareholders is equally imperative as of acquiring company (Teece and Shuen, 1997), and (Coase, 1937). In present paper the performance of acquired company has been measured by taking three dimensions into account viz., actual return, estimated return and abnormal return. The beta coefficients of BSE-S&P 500 have been taken as proxy for return on estimation basis. To execute the hypotheses paired sample t-test, regression for estimation and cumulative abnormal return methods are applied. The study finds that the share price of acquired company remained low in pre-acquisition period and became a cause of acquisition, similar to Porter (1985), Thomas (1996), and Dewey (1961). Post-acquisition performance could not meet the standard of expected returns and stays lower in majority cases akin to Hogarty (1970), and Franks, Harris, and Titman, (1991). How-ever, only in some instances abnormal return has been found positive after acquisition especially in long-run period.
Authors and Affiliations
Sunil Kumar
Keywords
Related Articles
- EP ID EP323772
- DOI -
- Views 57
- Downloads 0
Identification and Analysis of Entrepreneurial Strategies preserving Schumpeterian Rent
Purpose- As any increase in the price of resources and any imitation by competitors decrease entre-preneurial rent, the entrepreneurs should use some kind of strategies to preserve this rent. We used resource based view...
Factors Affecting Individual Taxpayer Compliance with Practice Self Assessment System as Intervening Variable
The purpose of this study is to obtain empirical evidence whether perceptions of corruption, fiscal services and tax sanctions affect taxpayer compliance with the practice of self assessment system as intervening variabl...
The Effectiveness of “PLANS (Personality Fit Business)” Training on Choosing Business Categories
Many entrepreneur students run their businesses which are not congruent with their personality and it will affect the effectiveness of business performance. According to Holland (1985), congruency between personality and...
Firm investment behavior in Kenya
To promote growth manufacturing industry in Kenya, the government must address various challenges that include low level of investment. But this first require that the policy makers to have under-standing of firm‟s inves...
Technopreneur Based Entrepreneurship Development Program as an Effort to Realize the Nationality of Nations in Politeknik Negeri Batam
The Entrepreneurship Development Program (PPK) program is a place for students and alumnus in entrepreneurship. The Entrepreneurship Program implemented comes from the DRPM Ristek Dikti. The Entrepreneurship Development...