Essays on corporate takeovers

• Published in: IDEAS Working Paper Series from RePEc
• Main Author: Vansteenkiste, Cara
• Format: Paper
• Language: English
• Published: St. Louis Federal Reserve Bank of St. Louis 01.01.2018
• Subjects: Acquisitions & mergers; Stockholders

This thesis consists of four chapters on corporate takeovers and mergers and acquisitions (M&As). The first chapter compiles the evidence on M&A success or failure to identify what variables determine the success of a takeover in terms of long-run shareholder returns and firm performance. The second chapter investigates how cross-country differences in creditor protection affect bond performance around cross-border deal announcements. It shows that bond returns are highly sensitive to the strength and enforcement of creditor protection, as bondholders of bidding firms respond more positively to deals where the target is located in a country with stronger creditor rights or more efficient claims enforcement through courts. The third chapter considers how an acquirer’s investment in its relations with employees affects the value creation process in domestic and cross-border M&As. It shows that whereas an acquirer’s investment in employee relations is positively related to shareholder value and firm performance when acquiring domestically, this effect is reversed when acquiring a foreign target. These results are mainly driven by the provision of monetary incentives such as a bonus plan or health insurance benefits, but the negative effect in cross-border deals is reduced when the acquirer has acquisition experience in the target’s country, or when the social security laws in the target’s county are relatively weak. The last chapter investigates how acquiring a minority stake in a target firm before committing to a majority stake affects the takeover process in terms of bid premiums, shareholder returns, and post-deal performance. Based on a global sample and a US-focused sample, it finds that two-stage acquisitions are less affected by information asymmetries and that they mitigate pre-emptive overbidding by deterring rival firms from making competing offers.