Determination of merger premium — Interralationship between corporate, target average and market

Author

Cai-fen, Zou

Author_Institution

Sch. of Accounting, Wuhan Textile Univ., Wuhan, China

fYear

2011

fDate

13-15 Sept. 2011

Firstpage

581

Lastpage

586

Abstract

Growth through mergers and acquisitions offers the greatest possibilities to grow quickly compared with organic growth and growth through innovation. But acquirers usually overpay for the target. Some blame it as reasons for long-run underperformance; some even take it as a bad decision. This paper first uses the average target characteristics around M&A announcement date as explanatory variables and premium one week before announcement date as the dependent variable, then the study use the monthly average P/E ratio of targets acquired and market P/E ratio as independent variables, the monthly average premium of targets received as dependent variables and regress on the time series data. The result shows that the monthly average premium of targets received has a negative significantly effect on the monthly average premium received by the targets involved.

Keywords

corporate acquisitions; time series; M and A average target characteristics; acquisitions; market P/E ration; merger premium; regression analysis; time series; Advertising; Companies; Corporate acquisitions; Investments; Security; Stock markets; Time series analysis; M&A; P/E ratio; market P/E ratio; premium;

fLanguage

English

Publisher

ieee

Conference_Titel

Management Science and Engineering (ICMSE), 2011 International Conference on

Conference_Location

Rome

ISSN

2155-1847

Print_ISBN

978-1-4577-1885-4

Type

conf

DOI

10.1109/ICMSE.2011.6070021

Filename

6070021