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An International Meeting of American Accounting
Association
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Bank Ties, Wealth Gain and Operating Gain of Japanese M&A Acquirers |
Huong Higgins
Worcester Polytechnic Institute
Abstract: Bank Ties, Wealth Gain and Operating Gain of Japanese M&A Acquirers
Abstract
This paper documents the wealth gain and operating gain of 133 Japanese M&A acquirers in the period 1990-2004, and their links with acquirer’s bank ties. Stock returns and change in Tobin’s Q over a 4-year period starting in Year -1 and ending in Year 2 relative to the merger announcement are examined for evidence of wealth gain, and change in cash flow return over the 4-year period is measured as evidence of operating gain. Acquirer’s bank ties are captured in terms of bank directorship, group influence, bank borrowings, and bank ownership in acquirers. The paper finds a negative association between bank ties and wealth gain and operating gain. The findings are consistent with ineffective bank governance in forming acquisition decisions for Japanese corporations and in monitoring them during the post-acquisition period.