What drives corporate minority acquisitions around the world? The case for financial constraints

Rose C. Liao

Journal of Corporate Finance, 2014, vol. 26, issue C, 78-95

Abstract: In this paper, I examine minority block acquisitions from 1990 to 2009, as well as possible theories for the presence of equity stake purchases. I find that target firms are financially constrained. Acquisitions significantly increase their stock prices at announcement, along with their investment expenditures afterwards. In the two years following the acquisition, 27% (9%) issue new equity (debt) and raise 27% (24%) of their market capitalization. These findings support the theory that equity stakes certify the investment opportunities of target firms. I also find some support for the contracting motive, mostly in countries with good investor protection and a well-performing banking sector.

Keywords: Minority acquisitions; Financial constraints; Product market relations; Corporate governance (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:26:y:2014:i:c:p:78-95

DOI: 10.1016/j.jcorpfin.2014.02.007

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