Thesis (Ph. D.)--University of Massachusetts Amherst, 2009. / Includes bibliographical references (p. 145-156). Print copy also available.

This study analyses the impact of M&As on acquiring company shareholder wealth and market risk through empirical evidence based on event study methods and cross-sectional regressions. The hypotheses investigated relate to the relevance of target status, method of payment, acquirers‘ bidding experience, and diversification motives. The evidence is based on a comprehensive sample of M&A transactions comprising 46,758 initial bids announced in 180 countries over the period 1977-2012, covering 88 industries. The study also investigates the relevance of deal and firm-specific factors affecting the likelihood of the success or failure of a deal once announced. The results of the event study indicate that acquirers‘ abnormal returns are not influenced by uncertainty about whether the announced deals will succeed or fail, which is consistent with the efficient market hypothesis. The event study evidence also confirms that acquirers‘ gains are most significant in cross-border M&As with acquirers located in developed countries and targets in developing countries. Further evidence from cross-sectional regressions confirms that cross-border and cross-industry diversification yields significant announcement gains for acquirers, although in comparison with domestic and focussed deals, such deals carry a greater risk of failure. Diversification has no significant impact on acquirers‘ market or systematic risk. In addition, the evidence with regard to the impact of target status and method of payment suggests that acquirers‘ gains are most significant in stock payment deals involving private or subsidiary targets, while stock payment deals involving publicly-listed targets yield lower returns. In general, cash payment for acquisitions serves to reduce the negative impact of acquiring public targets, while stock payment enhances the positive impact of acquiring private or subsidiary targets. Correspondingly, acquirers‘ market increases with the acquisition of non-public targets, while using cash payment reduces this risk. The overall findings in this regard are robust across various samples and are generally associated with the existence of information asymmetry between acquirers and targets. Finally, the findings reveal that acquirers‘ prior experience of bidding in M&A deals is associated with significantly lower shareholder returns for acquirers, and this also increases their risk. This finding, however, is specific to serial acquirers and generally supports the hubris motive.

This research focuses on the relationship between branding and company share price. This research’s purpose is to investigate the impact of branding indicators on a company share price. There has been a lot of research that has evidenced a positive relationship between marketing, of which its core component is branding, and firm performance. Even though it has been evidenced that strong branding leads to firm performance, stock analysis literature has not taken into consideration branding indicators as a key component in predicting the future performance of a company’s share price. This research addresses insights on the direct relationships between branding and share price values, which has not been extensively studied. Literature reviewed outlined three important measures of brands which offer a view of the future performance of a brand. These brand performance measurements are brand value, brand ranking and brand ratings. These are measures which are publicly available and have been measured over time. The research utilised data from Brandentity which is a brand valuing organisation which reports brand performance annually. The research investigated the impact of the change in brand value, brand ranking and brand ratings on company share price. The investigation shows brand rating as the only brand indicator tested that significantly positively impacts a company share price. This was found to mainly be because its orientation is competitor’s performance and future brand performance. Brand value and Brand rankings were found to have no significant impact on a company share price. The research thus concludes that brand indicators have a positive impact on a company share price and therefore brand measurements should be used as part of stock analysis to predict future performance of a company share price. / Dissertation (MBA)--University of Pretoria, 2014. / zkgibs2015 / Gordon Institute of Business Science (GIBS) / unrestricted

This dissertation comprises three essays in the field of empirical corporate finance and it contributes to the literature on the financial and real effects of corporate governance. Broadly defined, corporate governance encompasses all mechanisms that remove frictions in the relationship between firm insiders and outside stakeholders with claims on the cash flows of the company. The field has focused on the relationships between concentrated equity-holders and managers, but there are many other firm claimants. I consider two that are understudied: (1) The government, which holds a claim on firm cash flows through its taxation power. This stake motivates the government to detect and punish manager expropriation. And (2) passive investors, which appear not to engage with the running of individual firms in their maximally diversified portfolios but which may have a portfolio-maximization incentive to do so. In the first two chapters I hypothesize that credible government monitoring creates firm value by reducing frictions between firms and their bank lenders, allowing them to access more and cheaper financing to fund new investments. I quantify the effect in the context of a tax audit program in Ecuador wherein a sub-group of firms were chosen to be audited every year indefinitely. In the first chapter, I show that banks lend more to firms that are known to be under higher government scrutiny, both on the intensive and extensive margins, and do so at lower interest rates and longer maturities. I control for selection bias using a regression discontinuity design based on the procedure the tax authority used to choose which firms to add to the auditing program. In the second chapter, I use the same Ecuadorian setting as in the first chapter to show that government monitoring affects the real economy: Firms subject to more government monitoring increase their employment and their investment in physical capital. This is true even though the firms increase their average tax payments. The estimated employment effects jointly estimate new employment and formalization of existing employees. Investment effects are concentrated in physical capital investments, rather than in intangibles. But what mechanism is driving these results? I determine that the financial and real effects act primarily through government monitoring reducing ``hidden action'' frictions between firms and their lenders. The corporate governance effects of tax enforcement are valuable to firm investors, which update their beliefs on firms' abilities to divert firm resources going forward, making firm actions more predictable under the monitoring regime. The combination of a larger supply of bank credit at a lower price supports this mechanism. Moreover, monitored firms became more likely to borrow from a bank that they had never borrowed from before and to attract investments from new private investors. Finally, it is those firms that appear to be most likely to divert ex ante, by both tax and accounting measures of diversion, that receive the largest decrease in their cost of borrowing once they are chosen for the program. I conclude that this government monitoring, even when it was designed to maximize tax collection, had a meaningful effect on firm access to capital and on the real economy. This evidence supports the hypothesis that predictable government enforcement of laws is an important part of a comprehensive corporate governance system, lowering frictions that are not mitigated through other means and complimenting other mechanisms, such as bank monitoring. The policy implication is that an increase in tax enforcement can benefit both the government and outside firm stakeholders by generating greater tax revenue and increasing the value of the firm to outsiders. In the third chapter I test the hypothesis that shareholder governance, the primary mechanism for inducing managers to maximize own-firm value, may in some circumstances lower manager incentives to maximize the value of their firm when to do so they would need to engage in fierce competition with other firms that their shareholders also own. One way that cross-holding shareholders could incentivize managers to internalize their competition preferences is to influence the composition of executive compensation by increasing the payouts to managers when their industry does well relative to the payouts when their own firm does well. I find no robust relationship between the cross-holdings of minority shareholders and the competition incentives embedded in the compensation of top firm executives. Rather, I find that firms with shareholders that hold relatively more cross-holdings in direct competitor firms are more likely to adopt performance pay that expressly rewards out-performing peers. This chapter contributes to the current policy debate on how to regulate diversified investors by casting doubt on the anti-competitive effects of these holdings, at least through the mechanism of executive compensation, the main way that firms align shareholder and executive incentives.

Controversy currently exists over whether abnormal returns (ARs) are earned by shareholders of bidder and target banks through a Merger and Acquisition (M&A). The state of the economy in which the firms operate is often mentioned as a reason for firms engaging in M&As, however, the extent to which economies influence the ARs of shareholders is unknown. Following MacKinlay (1997), the aim of this study is to determine the average ARs earned or lost by shareholders of several banks around the world during an M&A. The results obtained may indicate that shareholders of bidding firms consider an M&A to be a wealth-destroying event irrespective of the state of the economy. It would seem that target firms’ shareholders consider M&As to be wealth-creating events when they occur during a period of real economic expansion. However, during periods of real economic contraction, target firms’ shareholders consider M&As to be wealth-destroying events. Thus, the state of an economy during an M&A can affect average ARs considerably.

臺灣在面臨臺幣升值、工資與房地產價格狂漲的經營困境之下，企業開始藉由購併活動來取得現成的管理經驗與經營資源，來彌補對海外經營環境缺乏認識或經驗不足的弱勢。國內企業因經營規模普遍太小，難以發揮規模經濟的綜效，以致相對削弱競爭能力，不利於產業升級。近年來由於政府的支持與推動，以及企業多年來累積的財富與股票市場的推波助瀾，更興起企業購併的風潮。而本研究的目的，為探討資本市場對上市公司的購併宣告有何反應。 　　本研究以民國78年1月至83年12月為研究期間，經蒐集相關資料後，選取42個進行購併宣告的上市公司樣本，利用傳統事件研究法及殘差分析，探究臺灣上市公司進行購併活動的宣告對股東財富之影響。所獲得的結論如以下四點： 　　1.就全體樣本實證結果顯示，上市公司的購併宣告將影響公司的市場價值，在宣告日當天有顯著正的異常報酬值1.192%(t=2.195)，表示股東財富將因此宣告訊息而增加。2.國際購併與國內購併的事件宣告在資本市場的反應均具有正的異常報酬值，但其結果不甚相同。3.在購併型態方面，非相關購併事件因為產業關聯性較低，綜效的價值較不能發揮，因此，此二購併類型的差異效果的確存在。4.位處不同產業的購併宣告亦有所差異。

Researchers posit that the primary objective of a business enterprise is to create shareholder value, and Economic Value Added (EVA) has been found to be the best available financial metric for measuring value. It is argued that EVA differs from other metrics in the sense that it incorporates both the enterprise profits and the capital costs for such profits. The study intended to establish attributes and competencies that are relevant, key and can bear the relationship with the EVA. In order to achieve this, the following questions were posed, namely; what key attributes and competencies an executive needs to possess for the purpose of organisational value creation?; and what is the measure to be utilised that includes these competencies to ensure organisational value creation and leadership development? The study aim was to propose and develop a diagnostic Value Creating Competencies Index, which is based on the components of or influenced by EVA. The success of the study was based on three pillars, firstly, EVA as a superior financial measure. To support this, literature that supported that EVA is adopted as a superior financial measure compared to other accounting based measures was reviewed and critiqued. The second element of the study was the focus on CEOs as critical and important drivers of value in organisations. However, the available literature was not able to provide a convincing argument to focus ‘all’ the attention on CEOs at the expense of other executives and the organisation at large. To determine whether CEOs can be given this attention and prominence, we conducted an additional study that assessed the share price movement on the public announcement of CEOs on companies listed on JSE. The findings of this study showed significant movement of share price and volume traded, and on the strength of this observation we concluded that CEOs can be used in this study as drivers of value. The third element was to look at competencies and competency modelling as a conduit that links value creation (EVA) and creators of value (CEOs). The literature on competencies was consulted and that of modelling, looking at the advantages and disadvantages of competency modelling. The study adopted a pragmatic paradigm and mixed methods approach. A qualitative dominant approach was followed. The study population consisted of Chief Executive Officers of the companies listed on the JSE top 40, who have had same position for a minimum of five years. Two CEOs could successfully be reached and interviewed. Data were collected through interviews, observations and documents analysis of the selected CEOs and their respective companies. Data were analysed qualitatively using the Atlas-ti software package, and then followed by a quantitative approach that was conducted using a Delphi approach. Two samples were utilised for this purpose. The first sample was a census of top 50 companies on Executive Search Review (United States headquartered companies that deals with CEO recruitments), the second sample was a random sample taken from JSE listed companies. Qualitative results were presented and discussed and the competencies were identified and linked to actual performance in respective organisations. In addition, identified competencies were confirmed by linking to the relevant quotations from the interviews and or analysed documents. Based on the qualitative results a competency model, Octastellatus CEO Competency model was developed and presented. From the competency model, the competency index Sustainable Economic Value Competency Index (SEVCI) was constructed and presented. The index has four clusters, namely; the core competencies, enabling competencies, differentiating competencies and competitive competencies. The index measure is presented as the sum of weighted averages of the four clusters. It is believed that this research work have made a significant and unique contribution by providing a quantitatively validated CEO competency model and corresponding competency index for assessing potential ability to create economic value. In an area that previously had a disconnection between ability to create value and actual value creation is now a known area and it is represented by SEVCI. / Business Management / DBL