Wealth effects of relative firm value in M&A deals: reallocation of physical versus intangible assets
Tóm tắt
This paper distinguishes between value creation through redistribution of physical assets and that from intangible assets. We decompose the market-to-book ratio into fundamental value and unexplained components and find that mergers create wealth when high-value firms primarily acquire physical assets from low-value firms. In contrast, deals motivated by transfer of investment opportunities generate wealth when growth-constrained low-value firms acquire substantial intangible assets from high-value targets. By separating the two motives for mergers, we provide empirical evidence of two diametrically opposed effects of relative firm value on wealth gains to shareholders, thus reconciling the conflicting evidence of the ‘high-buys-low’ effect from earlier studies. Concomitantly, our findings also explain the patterns of firm pairings in merger data that run contrary to conventional wisdom. Our empirical framework considers the effects of mispricing, governance, and size of assets reallocated and addresses concerns of selection bias. Additionally, we find evidence of post-merger wealth generation through the acquisition of growth opportunities in the form of intangible asset transfer from a high-value target to a low-value acquirer.
Tài liệu tham khảo
Aboody D, Lev B (2000) Information asymmetry, R&D, and insider gains. J Financ 55:2747–2766
Al Jifri K, Citron D (2009) The value-relevance of financial statement recognition versus note disclosure: evidence from goodwill accounting. Eur Account Rev 18:123–140
Andrade G, Mitchell M, Stafford E (2001) New evidence and perspectives on mergers. J Econ Perspect 15:103–120
Asquith P, Bruner RF, Mullins DW (1983) The gains to bidding firms from merger. J Financ Econ 11:121–139
Barber BM, Lyon JD (1996) Detecting abnormal operating performance: the empirical power and specification of test statistics. J Financ Econ 41:359–399
Barron OE, Byard D, Kile C, Riedl EJ (2002) High-technology intangibles and analysts’ forecasts. J Account Res 40:289–312
Bebchuk L, Cohen A, Ferrell A (2009) What matters in corporate governance? Rev Financ Stud 22:783–827
Ben-David I, Drake MS, Roulstone DT (2015) Acquirer valuation and acquisition decisions: identifying mispricing using short interest. J Financ Quan Anal 50:1–32
Bhagat S, Dong M, Hirshleifer D, Noah R (2005) Do tender offers create value? New methods and evidence. J Financ Econ 76:3–60
Bradley M, Desai A, Kim EH (1988) Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms. J Financ Econ 21:3–40
Bradley DJ, Jordan BD, Ritter JR (2006) Analyst behavior following IPOs: the “bubble period” evidence. Rev Financ Stud 21:101–133. https://doi.org/10.1093/rfs/hhl028
Brown JR, Fazzari SM, Petersen BC (2009) Financing innovation and growth: cash flow, external equity, and the 1990 s R&D boom. J Financ 64:151–185
Brunnermeier KM, Nagel S (2004) Hedge funds and the technology bubble. J Financ 59:2013–2040. https://doi.org/10.1111/j.1540-6261.2004.00690.x
Burch TR (2001) Locking out rival bidders: the use of lockup options in corporate mergers. J Financ Econ 60:103–141
Campello M, Graham JR (2013) Do stock prices influence corporate decisions? Evidence from the technology bubble. J Financ Econ 107:89–110
Cassiman B, Veugelers R (2006) Search of complementarity in innovation strategy: internal R&D and external knowledge acquisition. Manag Sci 52:68–82
Chen X, Harford J, Li K (2007) Monitoring: which institutions matter? J Financ Econ 86:279–305
Chidambaran NK, John K, Shangguan Z, Vasudevan G (2010) Hot and cold merger markets. Rev Quant Financ Account 34:327–349. https://doi.org/10.1007/s11156-009-0133-z
Chuang K-S (2018) Glamour versus value, market timing and firm performance: evidence from mergers and acquisitions. Rev Quant Financ Account 51:967–1003. https://doi.org/10.1007/s11156-017-0694-1
Core JE, Guay WR, Van Buskirk A (2003) Market valuations in the new economy: an investigation of what has changed. J Account Econ 34:43–67
Corrado CA, Hulten CR (2010) How do you measure a” technological revolution”? Am Econ Rev 100:99–104
Corrado CA, Hulten CR (2014) Innovation accounting. In: Jorgenson DW, Landefeld JS, Schreyer P (eds) Measuring economic sustainability and progress. University of Chicago Press, Chicago, pp 595–628
Dong M, Hirshleifer D, Richardson S, Teoh SH (2006) Does investor misvaluation drive the takeover market? J Financ 61:725–762
Eisfeldt AL, Papanikolaou D (2014) The value and ownership of intangible capital. Am Econ Rev 104:189–194
Fama EF, MacBeth JD (1973) Risk, return, and equilibrium: empirical tests. J Polit Econ 81(3):607–636
Faria AL (2008) Mergers and the market for organization capital. J Econ Theory 138:71–100. https://doi.org/10.1016/j.jet.2007.02.005
Fu F, Lin L, Officer MS (2013) Acquisitions driven by stock overvaluation: are they good deals? J Financ Econ 109:24–39
Fuller K, Netter J, Stegemoller M (2002) What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions. J Financ 57:1763–1793
Golubov A, Petmezas D, Travlos NG (2016) Do stock-financed acquisitions destroy value? New methods and evidence. Rev Financ 20:161–200
Gompers PA, Ishii JL, Metrick A (2003) Corporate governance and equity prices. Q J Econ 118:107–155
Harford J, Mansi SA, Maxwell WF (2008) Corporate governance and firm cash holdings in the US. J Financ Econ 87:535–555
Harrison JS, Hart M, Oler DK (2014) Leverage and acquisition performance. Rev Quant Financ Account 43:571–603. https://doi.org/10.1007/s11156-013-0385-5
Heckman JJ (1976) The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models. Annals Econ Soc Measurement 5:475–492
Heckman JJ (1979) Sample selection bias as a specification error. Econometrica 47:153–162
Hertzel MG, Li Z (2010) Behavioral and rational explanations of stock price performance around SEOs: evidence from a decomposition of market-to-book ratios. J Financ Quan Anal 45:935–958. https://doi.org/10.1017/S002210901000030X
Hoberg G, Phillips G (2010) Product market synergies and competition in mergers and acquisitions: a text-based analysis. Rev Financ Stud 23:3773–3811
Ishii J, Xuan Y (2014) Acquirer-target social ties and merger outcomes. J Financ Econ 112:344–363
Jensen MC (1986) Agency cost of free cash flow, corporate finance, and takeovers. Am Econ Rev 76:323–329
Jovanovic B, Braguinsky S (2004) Bidder discounts and target premia in takeovers. Am Econ Rev 94:46–56
Jovanovic B, Rousseau PL (2002) The Q-theory of mergers. Am Econ Rev 92:198–204
Jovanovic B, Rousseau PL (2008) Mergers as reallocation. Rev Econ Stat 90:765–776
Kim EH, Singal V (1993) Mergers and market power: evidence from the airline industry. Am Econ Rev 83:549–569
Lang LH, Stulz RM, Walkling RA (1989) Managerial performance, Tobin’s Q, and the gains from successful tender offers. J Financ Econ 24:137–154
Lehn K, Poulsen A (1989) Free cash flow and stockholder gains in going private transactions. J Financ 44:771–787
Levine O (2017) Acquiring growth. J Financ Econ 126:300–319
Li X (2013) Productivity, restructuring, and the gains from takeovers. J Financ Econ 109:250–271
Li K, Qiu B, Shen R (2018) Organization capital and mergers and acquisitions. J Financ Quan Anal 53:1871–1909
Liu Y (2019) Shareholder wealth effects of M&A withdrawals. Rev Quant Financ Account 52:681–716. https://doi.org/10.1007/s11156-018-0722-9
Ljungqvist A, Wilhelm WJ (2003) IPO pricing in the dot-com bubble. J Financ 58:723–752
Loughran T, Ritter JR (2004) Why has IPO underpricing changed over time? Financ Manag 33:5–37
Lyon JD, Barber BM, Tsai CL (1999) Improved methods for tests of long-run abnormal stock returns. J Financ 54:165–201
Makrominas M (2017) Recognized intangibles and the present value of growth options. Rev Quant Financ Account 48:311–329
Maksimovic V, Phillips G (2001) The market for corporate assets: who engages in mergers and asset sales and are there efficiency gains? J Financ 56:2019–2065
Maksimovic V, Phillips G, Yang L (2013) Private and public merger waves. J Financ 68:2177–2217
Moeller SB, Schlingemann FP, Stulz RM (2004) Firm size and the gains from acquisitions. J Financ Econ 73:201–228
Mulherin JH, Boone AL (2000) Comparing acquisitions and divestitures. J Corp Financ 6:117–139
Netter J, Stegemoller M, Wintoki MB (2011) Implications of data screens on merger and acquisition analysis: a large sample study of mergers and acquisitions from 1992 to 2009. Rev Financ Stud 24:2316–2357. https://doi.org/10.1093/rfs/hhr010
Nguyen NH, Phan HV (2017) Policy uncertainty and mergers and acquisitions. J Financ Quan Anal 52:613–644
Officer MS (2003) Termination fees in mergers and acquisitions. J Financ Econ 69:431–467
Peters RH, Taylor LA (2017) Intangible capital and the investment-q relation. J Financ Econ 123:251–272
Phillips GM, Zhdanov A (2013) R&D and the incentives from merger and acquisition activity. Rev Financ Stud 26:34–78
Rhodes-Kropf M, Robinson DT (2008) The market for mergers and the boundaries of the firm. J Financ 63:1169–1211
Rhodes-Kropf M, Viswanathan S (2004) Market valuation and merger waves. J Financ 59:2685–2718
Rhodes-Kropf M, Robinson DT, Viswanathan S (2005) Valuation waves and merger activity: the empirical evidence. J Financ Econ 77:561–603
Ritter JR (2018) Initial public offerings: updated statistics. University of Florida, Gainesville
Roll R (1986) The hubris hypothesis of corporate takeovers. J Bus 59:197–216
Savor PG, Lu Q (2009) Do stock mergers create value for acquirers? J Financ 64:1061–1097
Servaes H (1991) Tobin’s Q and the gains from takeovers. J Financ 46:409–419
Shleifer A, Vishny RW (2003) Stock market driven acquisitions. J Financ Econ 70:295–311
Van Bekkum S, Smit H, Pennings E (2011) Buy smart, time smart: are takeovers driven by growth opportunities or mispricing? Financ Manag 40:911–940
Vorst P, Yohn TL (2018) Life cycle models and forecasting growth and profitability. Account Rev 93:357–381
Wang C, Xie F (2009) Corporate governance transfer and synergistic gains from mergers and acquisitions. Rev Financ Stud 22:829–858