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Renneboog L.d.r. - One of the best experts on this subject based on the ideXlab platform.
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What determines the Financing decision in corporate Takeovers: Cost of capital, agency problems, or the means of payment?
2009Co-Authors: Martynova M., Renneboog L.d.r.Abstract:How is a Takeover bid financed and what is its impact on the expected value creation of the Takeover? An analysis of the sources of transaction Financing has been largely ignored in the Takeover literature. Using a unique dataset, we show that external sources of Financing (debt and equity) are frequently employed in Takeovers involving cash payments. Acquisitions with the same means of payment but different sources of transaction funding are in fact quite distinct. Acquisitions financed with internally generated funds significantly underperform those financed with debt. The Takeover Financing decision is influenced by the bidder's pecking order preferences, its growth potential, and its corporate governance environment, all of which are related to the cost of external capital. The choice of equity versus internal cash or debt Financing also depends on the bidder's strategic preferences with respect to the means of payment
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What Determines the Financing Decision in Corporate Takeovers: Cost of Capital, Agency Problems or the Means of Payment?
'Algorithmic Finance LLC', 2008Co-Authors: Martynova M., Renneboog L.d.r.Abstract:While the means of payment in Takeovers has been a focal point in the Takeover literature, what has largely been ignored is the analysis of how the Takeover bid is financed and what its impact is on the expected value creation of the Takeover. This paper investigates the sources of transaction Financing in European corporate Takeovers launched during the period 1993- 2001 (the fifth Takeover wave). Using a unique dataset, we show that the external sources of Financing (debt and equity) are frequently employed in Takeovers involving cash payments. Acquisitions with the same means of payment but different sources of transaction funding are quite distinct. For instance, a significantly negative price revision following the announcement of a Takeover is not unique to the equity-paid M&As; it is also observed in any other deals that involve equity Financing (including cash-paid and mixed-paid M&As). Also, acquisitions financed with internally generated funds significantly underperform those financed with debt. Our multinomial logit and nested logit analyses show that the Takeover Financing decision is influenced by the bidder’s pecking order preferences, its growth potential, and its corporate governance environment, all of which are related to the cost of external capital. There is also evidence that the choice of equity versus internal cash or debt Financing is influenced by the bidder’s strategic preferences with respect to the means of payment. We find no evidence of Financing decisions driven by agency conflicts between managers and shareholders or between shareholders and creditors
Martynova M. - One of the best experts on this subject based on the ideXlab platform.
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What determines the Financing decision in corporate Takeovers: Cost of capital, agency problems, or the means of payment?
2009Co-Authors: Martynova M., Renneboog L.d.r.Abstract:How is a Takeover bid financed and what is its impact on the expected value creation of the Takeover? An analysis of the sources of transaction Financing has been largely ignored in the Takeover literature. Using a unique dataset, we show that external sources of Financing (debt and equity) are frequently employed in Takeovers involving cash payments. Acquisitions with the same means of payment but different sources of transaction funding are in fact quite distinct. Acquisitions financed with internally generated funds significantly underperform those financed with debt. The Takeover Financing decision is influenced by the bidder's pecking order preferences, its growth potential, and its corporate governance environment, all of which are related to the cost of external capital. The choice of equity versus internal cash or debt Financing also depends on the bidder's strategic preferences with respect to the means of payment
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What Determines the Financing Decision in Corporate Takeovers: Cost of Capital, Agency Problems or the Means of Payment?
'Algorithmic Finance LLC', 2008Co-Authors: Martynova M., Renneboog L.d.r.Abstract:While the means of payment in Takeovers has been a focal point in the Takeover literature, what has largely been ignored is the analysis of how the Takeover bid is financed and what its impact is on the expected value creation of the Takeover. This paper investigates the sources of transaction Financing in European corporate Takeovers launched during the period 1993- 2001 (the fifth Takeover wave). Using a unique dataset, we show that the external sources of Financing (debt and equity) are frequently employed in Takeovers involving cash payments. Acquisitions with the same means of payment but different sources of transaction funding are quite distinct. For instance, a significantly negative price revision following the announcement of a Takeover is not unique to the equity-paid M&As; it is also observed in any other deals that involve equity Financing (including cash-paid and mixed-paid M&As). Also, acquisitions financed with internally generated funds significantly underperform those financed with debt. Our multinomial logit and nested logit analyses show that the Takeover Financing decision is influenced by the bidder’s pecking order preferences, its growth potential, and its corporate governance environment, all of which are related to the cost of external capital. There is also evidence that the choice of equity versus internal cash or debt Financing is influenced by the bidder’s strategic preferences with respect to the means of payment. We find no evidence of Financing decisions driven by agency conflicts between managers and shareholders or between shareholders and creditors
Gao, Simon S - One of the best experts on this subject based on the ideXlab platform.
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The Impact of Target Capital Structure and Market Mispricing on Takeover Financing: Empirical Evidence from China
'Zant World Press', 2016Co-Authors: Li Jinglin, Gao, Simon SAbstract:The dynamic trade-off theory and the market timing theory of capital structure are applied to analyze 5,923 Chinese Takeover events from 2007 to 2014 with a view to identifying the influence of target capital structure (TCS), market mispricing and their interactions on Takeover Financing methods. It was found that leverage deviation from TCS had a significant effect on the choice of Takeover Financing methods and the choice was affected by market timing. Overleveraged bidders and overvalued bidders tended to choose equity Financing, compared to underleveraged and undervalued counterparts. Also, the influence of TCS on Takeover Financing had the market timing effect. The results suggested both the dynamic trade-off theory and the market timing theory of capital structure had explanatory power in interpreting Takeover Financing choice, although the dynamic trade-off theory seemed to be more influential
Bao Y - One of the best experts on this subject based on the ideXlab platform.
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Developing an active market for corporate control in China: Takeover Law, the Role and Governance of Financial Intermediaries, and the Financing Sources of Takeovers
'Pravni Fakultet Sveucilista u Zagrebu (Law School of the University of Zagreb)', 2021Co-Authors: Bao YAbstract:Since the Vanke Takeover case appeared in China in 2016, there have been an increasing number of Takeover cases which have occurred without sufficient regulations to guide the practice. The direction for further reforms of Takeover law is, therefore, one of the most hotly debated topics. China is currently finding its own indigenous way in developing a Takeover market and it is still an open question as to what Takeover regulatory regime China should follow. The legality of certain issues related to Takeovers in China, such as several Financing models of Takeovers and the various types of anti-Takeover provisions, is still uncertain. In addition, there is no systematic analysis of the role of financial intermediaries in the Chinese Takeover market – even though financial intermediaries are widely involved in Takeovers. Since 2016, a new situation has developed in which several Takeover cases have been conducted under the support of financial intermediaries. As a result, the stability of the entire financial market has been challenged, such as causing the rising systemic risk of shadow banking businesses involved in many hostile Takeovers. The current Takeover law in China is initially followed the UK model, although since 2006 there has been a significant deviation from the UK model. Within the UK market, financial intermediaries such as investment banks, asset management industries, and stock exchanges play an essential role in shaping and gatekeeping the market and Takeover law. This research will focus on what China could learn from the UK Takeover Code and how China could adopt this model whilst keeping its own unique approach. This thesis will start by answering the questions as to whether China needs to develop an active market for corporate control and why Chinese Takeover laws have gradually deviated from the UK model (chapters two and three). Chapters four and five will discuss the empirical studies on two cornerstone rules, the mandatory bid rule and the non-frustration rule, and this will be followed by providing empirical evidence for law reform proposals. Adequate Financing sources decide the fate of Takeovers. Due to the strict administrative restrictions on Takeover loans provided by banks in China, the shadow banking system provides alternative solutions for Takeover Financing with higher systemic risks in the Vanke case and shows its potential for Financing Takeovers. Chapters six and seven will discuss how to regulate the shadow banking system and the asset management industry under the context of market for corporate control. The chapter eight will examine applications of FinTech in the market for corporate control. This chapter eight is based on the hypothesis that Securities Token Offerings (STOs) either partially or fully substitute traditional Initial Public Offerings (IPOs). The thesis will then conclude in the final stage
Li Jinglin - One of the best experts on this subject based on the ideXlab platform.
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The Impact of Target Capital Structure and Market Mispricing on Takeover Financing: Empirical Evidence from China
'Zant World Press', 2016Co-Authors: Li Jinglin, Gao, Simon SAbstract:The dynamic trade-off theory and the market timing theory of capital structure are applied to analyze 5,923 Chinese Takeover events from 2007 to 2014 with a view to identifying the influence of target capital structure (TCS), market mispricing and their interactions on Takeover Financing methods. It was found that leverage deviation from TCS had a significant effect on the choice of Takeover Financing methods and the choice was affected by market timing. Overleveraged bidders and overvalued bidders tended to choose equity Financing, compared to underleveraged and undervalued counterparts. Also, the influence of TCS on Takeover Financing had the market timing effect. The results suggested both the dynamic trade-off theory and the market timing theory of capital structure had explanatory power in interpreting Takeover Financing choice, although the dynamic trade-off theory seemed to be more influential
