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Motives for Mergers and Acquisitions: Ex‐Post Market Evidence from the US
Author(s) -
Nguyen Hien Thu,
Yung Kenneth,
Sun Qian
Publication year - 2012
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12000
Subject(s) - hubris , extant taxon , mergers and acquisitions , sample (material) , agency (philosophy) , value (mathematics) , agency cost , economics , business , financial economics , monetary economics , accounting , management , finance , sociology , corporate governance , shareholder , history , social science , chemistry , chromatography , evolutionary biology , machine learning , computer science , biology , classics
Despite extensive research, merger motivation is largely inconclusive. Incomparable methodologies further exacerbate debates in the extant literature. This study uses a recently developed technique to examine post‐acquisition evidence as to the motives behind merger and acquisition activity. Using a sample of 3,520 domestic acquisitions in the United States, we find that 73% are related to market timing; 59% are related to agency motives and/or hubris; and 3% are responses to industry and economic shocks. Our results also show that about 80% of the mergers in our sample involved multiple motives. Thus, in general it is very difficult to have a clear picture of merger motivation because value‐increasing and value‐decreasing motives may coexist.