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Title: The reputation of economic agents in mergers and acquisitions
Author: Golubov, Andrey
ISNI:       0000 0004 2709 2160
Awarding Body: University of Surrey
Current Institution: University of Surrey
Date of Award: 2011
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This thesis studies the effects of the economic agents' reputation in mergers and acquisitions (M&As). Given their paramount importance in takeover situations, the three specific economic agents chosen to be examined are i) bidder financial advisors, ii) target firm auditors, and iii) members of the bidders' boards of directors. First, the results of the study shed new light on the role of bidder financial advisors in M&As. Contrary to prior studies, top-tier advisors are found to be associated with higher bidder returns relative to their non-top-tier counterparts but in public acquisitions only, where the advisor reputational exposure and required skills set are relatively larger. This translates into $65.83 million shareholder value enhancement for a mean-sized bidder. The improvement comes from top-tier advisors' ability to identify mergers with higher synergies and to get a larger share of synergies to accrue to bidders. Consistent with the premium price - premium quality equilibrium, top-tier advisors charge premium fees in these transactions. Second, the study documents several ways in which target firm auditor reputation affects M&A outcomes. Given more accurate financial statements of reputably audited targets, better bidder-target matches can be identified, while a lower discount rate is required to justify the risk of the projected cash flows of the combination, leading to higher NPV. It is found that synergies are, indeed, higher in such acquisitions. Premiums are independent of target firm auditor type, allowing bidders to capture the benefit of reputable audits. This benefit increases with information asymmetry faced by bidders. Bids for targets audited by reputable auditors are also more likely to succeed. Third, the study re-examines the effect of board structures on acquiring firms' returns. In contrast to prior work, the UK takeover market is used to exploit several appealing institutional characteristics that contribute to the power of the required tests. It is found that board structures of the nature introduced by the Cadbury Report are associated with higher acquirer returns, driven mainly by board independence, with the CEO/Chairman split having a smaller impact. These effects, however, are pronounced for public acquisitions only, consistent with the theories of information cost, and with greater director reputational exposure. The results of the three studies are broadly consistent with the reputational concerns of economic agents, and offer interesting and important implications for both academics practitioners.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available