Hussain, Tanveer and Tunyi, Abongeh A and Sufyan, Muhammad and Shahab, Yasir (2022) Powerful bidders and value creation in M&As. International Review of Financial Analysis, 81. p. 102076. DOI https://doi.org/10.1016/j.irfa.2022.102076
Hussain, Tanveer and Tunyi, Abongeh A and Sufyan, Muhammad and Shahab, Yasir (2022) Powerful bidders and value creation in M&As. International Review of Financial Analysis, 81. p. 102076. DOI https://doi.org/10.1016/j.irfa.2022.102076
Hussain, Tanveer and Tunyi, Abongeh A and Sufyan, Muhammad and Shahab, Yasir (2022) Powerful bidders and value creation in M&As. International Review of Financial Analysis, 81. p. 102076. DOI https://doi.org/10.1016/j.irfa.2022.102076
Abstract
This paper explores the role of bargaining ability in corporate mergers and acquisitions (M&As) by focusing on acquiring firms with ex-ante market power—powerful bidders. Drawing from a bargaining power theoretical stance, we argue that powerful bidders create value from M&A activity by paying comparatively lower premiums. We test our empirical proposition using a sample of 9327 M&A deals announced between 2004 and 2016 by bidders across 30 countries. Contrary to the stylized fact that bidders do not gain from M&A activity, we uncover evidence suggesting that powerful bidders pay lower bid premiums and, consequently, earn positive (and relatively higher) cumulative announcement returns (CARs) from M&A deals. On average, the mean returns to powerful bidders (1.3%) are at least twice those of their less powerful counterparts (0.6%). We identify “low financial constraints” as a potential channel through which higher bidder power translates to improved deal performance. Overall, our results provide new evidence on how industry dynamics, notably bargaining power, influences M&A outcomes.
Item Type: | Article |
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Uncontrolled Keywords: | Bargaining power; Financial constraints; Powerful bidders; Takeover premium |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 16 Nov 2022 13:46 |
Last Modified: | 30 Oct 2024 21:03 |
URI: | http://repository.essex.ac.uk/id/eprint/33898 |