Presentation Title
Panel Name
Advances in Business and Management
Location
Lecture Center 13
Start Date
3-5-2019 3:15 PM
End Date
3-5-2019 4:30 PM
Presentation Type
Oral Presentation
Academic Major
Accounting, Finance
Abstract
The purpose of this study is to examine abnormal wealth effects observed by acquirer and target shareholders in technology-sector M&A deals, as well as the effect that liquidity positioning has on merger premiums or discounts. Abnormal wealth effects experienced by the acquirer and target both pre- and post-merger announcement were tested in a two-sided event study consisting of a large sample of companies representing the two sides of the transaction. The event study demonstrates that different characteristics of M&A deals, i.e. payment consideration and domesticity, have asymmetric effects on abnormal wealth effects for shareholders of both parties, with the most dramatic effects manifesting in high abnormal returns prior-to, and after acquisition announcement dates for targets. It is concluded that the liquidity ratios such as current assets to current liabilities and cash as a percentage of total assets has no significant effect on merger premiums while the solvency measure of total assets to total liabilities has a significantly negative effect on merger premiums for both bidders and targets.
Select Where This Work Originated From
Departmental Honors Thesis
Award
Presidential Award
First Faculty Advisor
Rita Biswas
First Advisor Email
biswas.rita@gmail.com
First Advisor Department
Finance
The work you will be presenting can best be described as
Finished or mostly finished by conference date
Included in
The Role of Liquidity in Technology Sector M&As
Lecture Center 13
The purpose of this study is to examine abnormal wealth effects observed by acquirer and target shareholders in technology-sector M&A deals, as well as the effect that liquidity positioning has on merger premiums or discounts. Abnormal wealth effects experienced by the acquirer and target both pre- and post-merger announcement were tested in a two-sided event study consisting of a large sample of companies representing the two sides of the transaction. The event study demonstrates that different characteristics of M&A deals, i.e. payment consideration and domesticity, have asymmetric effects on abnormal wealth effects for shareholders of both parties, with the most dramatic effects manifesting in high abnormal returns prior-to, and after acquisition announcement dates for targets. It is concluded that the liquidity ratios such as current assets to current liabilities and cash as a percentage of total assets has no significant effect on merger premiums while the solvency measure of total assets to total liabilities has a significantly negative effect on merger premiums for both bidders and targets.