Three essays in corporate finance: the determinants of mergers and acquisitions

Hao, Zhiwei (2021) Three essays in corporate finance: the determinants of mergers and acquisitions. PhD thesis, University of Glasgow.

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This thesis focuses on the determinants of mergers and acquisitions (M&As) in the US and international market. To begin with, this thesis investigates whether the mega-mergers tend to cluster by time and industry and what is the cause of mega-merger waves. This research finds strong support for capital liquidity theory by Harford (2005). In contrast to the conclusion of Harford (2005), the industry economic shock index is insignificant and does not have explanatory power in the start of mega-merger waves. Capital liquidity is clearly established as causing industry mega-merger waves to cluster in time. Further to this, the mis-valuation factors studied have only a fair explanatory power in predicting mega-merger waves, and they add only marginally to the predictive power of the capital liquidity theory.

Furthermore, this thesis studies the relationship between state visits and cross-border merger and acquisition (M&A) activity. Based on 1,161 official political state visits paid by the head of 19 countries to 49 countries and 11,531 cross-border acquisitions, this research finds that corporations from visiting countries are more likely to acquire corporations in the countries hosting the visit. Domestic acquisitions in the host country or M&As with non-visiting countries are not elevated. Evidence from instrumental variable analysis points towards a causal effect of state visits on M&A activity. Further analysis shows that the elevated M&A activity originating from visiting countries can be attributed to business networking and a reduction in investment uncertainty and cultural barriers.

In addition, this thesis further examines the relationship between political state visits and post-merger short- and long-term performance. This research finds that cross-border deals made during the visit year and the years after generate lower abnormal returns in the long- term than those in the years of non-visits. Cross-border deals during the visit year and years after generate higher abnormal returns in the short-term than those in the years of non-visits. However, the results in the short-term return are not statistically significant, which means that the deals during visit years and non-visit years are not fundamentally different. This research concludes that cross-border deals announced during the visit year and the years after could be driven by political reasons rather than value maximizing.

Item Type: Thesis (PhD)
Qualification Level: Doctoral
Keywords: Mergers and acquisitions, mega-merger waves, political state visits and post-merger performance.
Subjects: H Social Sciences > HG Finance
Colleges/Schools: College of Social Sciences > Adam Smith Business School > Accounting and Finance
Supervisor's Name: Vagenas-Nanos, Dr. Evangelos
Date of Award: 2021
Embargo Date: 4 May 2024
Depositing User: Mr Zhiwei Hao
Unique ID: glathesis:2021-82155
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 05 May 2021 08:29
Last Modified: 19 Aug 2022 15:55
Thesis DOI: 10.5525/gla.thesis.82155

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