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• W2894829239 abstract "This thesis makes an original contribution to the literature by examining how thedisparities between acquirer’s and target’s firm characteristics, namely the corporate cultureand credit rating levels, affect the multiple dimensions of M&As. I investigate how thecomplementary fitness of acquirer’s and target’s characteristics in a deal impacts acquisitionwealth and deal characteristics.I first study the effect of corporate cultural distance between acquirers and targets onM&As based on unique corporate culture data from EIRIS. The results show that deals withlarger corporate cultural distance have lower acquirer cumulative abnormal returns (CARs),lower synergy returns around the deal announcements, and weaker stock performance in thelong-run. These results provide empirical evidence for the “cultural clashes” theorydocumented in the previous literature and suggest that market perceives corporate culturaldistance as a major risk in the post-acquisition integration process. Furthermore, I find thatcorporate cultural distance reduces the probability of deal completion and increases the timetaken to complete a deal, reflecting the existence of negotiation frictions under culturaldisparity. In addition, the percentage of payment made in stock is found to be lower for dealswith larger corporate cultural distance. The results are robust after controlling for nationalcultural distance, firm and deal characteristics. This is the first study that formally looks intothe effect of corporate culture disparity on M&As using a wide coverage of internationaldata.Next, I focus on another acquirer-target disparity. I examine the impact of acquirertargetcredit rating distance on M&A wealth. I find that deals with larger credit ratingdistance benefit from higher acquirer’s, target’s and synergy returns at the time of theannouncement. Such a positive wealth effect is also supported in the long-run performance test. These results provide evidence on the benefit of financial capability transfer in thecombined entity after acquisitions such that valuable financial synergy can be generated byefficiently utilizing the pooled financing abilities of the merging firms. Consequently, theproblem of underinvestment due to financial constraint and the issue of free-cash flow underfinancial slack can be alleviated with such efficient sharing of financing resources.I then extend the study on acquirer-target credit rating distance in the final empiricalchapter to examine its impact on the various aspects of deal transactions and characteristics.I show that deals with larger credit rating distance are more likely to use cash as the methodof payment, possibly due to the fact that raised debt can be better absorbed by the pooledfinancing capability after the acquisition. In addition, I also find that deals with larger creditrating distance have higher success rates and tend to take less time to complete, reflectingthe motivation from both sides to complete the deals in order to harvest the potentialfinancial synergy gain. Furthermore, I illustrate the dynamics of credit rating changes aroundacquisitions and how they are associated with firms’ relative credit ratings in a deal.Overall, this thesis demonstrates the importance of taking the differences betweenacquirers’ and targets’ “soft” characteristics into consideration when evaluating acquisitionsand processing deals. The studies contribute to the finance literature with original findingsunder the comprehensive event study framework employed. They also offer practicalimplications for managers and financial advisors such that future potential M&A deals canbe assessed with greater meticulousness for maximum wealth creation." @default.
• W2894829239 created "2018-10-12" @default.
• W2894829239 creator A5043288800 @default.
• W2894829239 date "2018-01-01" @default.
• W2894829239 modified "2023-09-27" @default.
• W2894829239 title "The impact of disparities in acquirer's and target's firm characteristics on mergers and acquisitions" @default.
• W2894829239 hasPublicationYear "2018" @default.
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