Date of Award

1999

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Finance

First Advisor

Myron B. Slovin

Abstract

This dissertation provides an extensive examination of a corporate control transaction that has not been previously examined in the finance literature, an incomplete acquisition. An incomplete acquisition is defined as an offer for a sufficient amount of equity in a target firm to give the bidder effective control that is not accompanied by a disclosed intention to acquire the remaining minority shares. An original database of incomplete acquisitions is developed and used to examine three major aspects of these unique control transactions. First, descriptive data about the prevalence of incomplete acquisitions and the mechanisms that are used to effect these transactions are provided and event study methodology is used to assess the market valuation effects of incomplete acquisition announcements. Second, the pre- and post-acquisition operating performance of incomplete acquisition targets is examined. By analyzing both the valuation effects and subsequent operating performance of incomplete acquisitions, this study provides evidence to distinguish among alternative hypotheses that generate differential predictions about the wealth effects of changes in control, the distribution of wealth between targets and acquirers, and the subsequent performance of target firms. Third, the ultimate disposition of the parent's controlling stake and the minority interest in the target and the valuation effects of disposition transactions are examined. Empirical results indicate that incomplete acquisitions are value enhancing for targets and have a non-negative effect on the wealth of acquirers. The analysis of target operating performance indicates that target firm performance is similar to control firms both before and after the acquisition. The normal pre- and post-operating performance suggests that increases in target shareholder wealth at incomplete acquisition announcements are not due to the market's anticipation of gains from improved efficiency or synergy. The evidence is also inconsistent with the hypothesis that, subsequent to the acquisition, acquirers are able to expropriate the wealth of minority shareholders. The finding of normal pre- and post-acquisition target performance combined with the evidence of significant gains in aggregate shareholder wealth are consistent with the information hypothesis which posits that positive private information concerning target value is revealed by the bidding and acquisition process.

ISBN

9780599474604

Pages

179

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