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Acquisition announcements and stock market valuations of acquiring firms' rivals: A test of the growth probability hypothesis in China

Identifieur interne : 000942 ( Istex/Checkpoint ); précédent : 000941; suivant : 000943

Acquisition announcements and stock market valuations of acquiring firms' rivals: A test of the growth probability hypothesis in China

Auteurs : Ajai S. Gaur [États-Unis] ; Shavin Malhotra [Canada] ; Pengcheng Zhu [États-Unis]

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RBID : ISTEX:8F0EA33BCF107032EB8E0B764BED269EF6AD57B9

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English descriptors

Abstract

To examine the impact of acquisition announcements on the stock market returns of rivals of the acquiring firms, we propose a growth probability hypothesis: when an acquisition is announced, it signals the potential for future growth in the acquirer's industry to the market, resulting in positive stock market reactions to rivals of the acquiring firms. We test the growth probability hypothesis with a longitudinal sample of Chinese domestic and cross‐border acquisitions during 1993–2008. The results provide robust support for this hypothesis as a means to explain market reactions to rivals of acquiring firms. We also empirically test and negate alternative theoretical explanations advanced in prior literature to explain positive market reactions to rivals of the target firms. Copyright © 2012 John Wiley & Sons, Ltd.

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DOI: 10.1002/smj.2009


Affiliations:


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ISTEX:8F0EA33BCF107032EB8E0B764BED269EF6AD57B9

Le document en format XML

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<term>Baseline hypothesis</term>
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<term>Chinese government</term>
<term>Chinese market</term>
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<term>Collusive synergies</term>
<term>Competitive effects</term>
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<term>Market capitalization</term>
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<term>Market ratio</term>
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<term>Organization science</term>
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<term>Rand journal</term>
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<term>Robust support</term>
<term>Rutgers business school</term>
<term>Same industry</term>
<term>Scal year</term>
<term>Sensitivity analyses</term>
<term>Stock market</term>
<term>Stock market reactions</term>
<term>Stock market returns</term>
<term>Stock market valuations</term>
<term>Stock markets</term>
<term>Stock prices</term>
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<term>Study period</term>
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<term>Synergy</term>
<term>Takeover</term>
<term>Theoretical arguments</term>
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<term>Acquisition probability hypotheses</term>
<term>Acquisition probability hypothesis</term>
<term>Acquisition sample</term>
<term>Ample opportunities</term>
<term>Announcement date</term>
<term>Announcement dates</term>
<term>Announcement returns</term>
<term>Asset growth rate</term>
<term>Asset growth ratio</term>
<term>Assets ratio</term>
<term>Backman</term>
<term>Baseline hypothesis</term>
<term>Brito</term>
<term>Business groups</term>
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<term>Chinese government</term>
<term>Chinese market</term>
<term>Chinese stock markets</term>
<term>Clougherty</term>
<term>Collusive synergies</term>
<term>Competitive effects</term>
<term>Control variables</term>
<term>Copyright</term>
<term>Corporate acquisitions</term>
<term>Daily stock prices</term>
<term>Descriptive statistics</term>
<term>Event window</term>
<term>Extant literature</term>
<term>Financial economics</term>
<term>Focal acquisition</term>
<term>Free cash</term>
<term>Future acquisitions</term>
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<term>Growth markets</term>
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<term>Nancial</term>
<term>Nancial characteristics</term>
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<term>Stock markets</term>
<term>Stock prices</term>
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<term>Study period</term>
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<term>Takeover</term>
<term>Theoretical arguments</term>
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<div type="abstract" xml:lang="en">To examine the impact of acquisition announcements on the stock market returns of rivals of the acquiring firms, we propose a growth probability hypothesis: when an acquisition is announced, it signals the potential for future growth in the acquirer's industry to the market, resulting in positive stock market reactions to rivals of the acquiring firms. We test the growth probability hypothesis with a longitudinal sample of Chinese domestic and cross‐border acquisitions during 1993–2008. The results provide robust support for this hypothesis as a means to explain market reactions to rivals of acquiring firms. We also empirically test and negate alternative theoretical explanations advanced in prior literature to explain positive market reactions to rivals of the target firms. Copyright © 2012 John Wiley & Sons, Ltd.</div>
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