MOTIVES FOR TAKEOVERS: An Empirical Investigation from Finland
Kuittinen, Jussi (2002)
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This paper is employing several methodologies to differentiate motives for takeover. It is found that synergy is the primary motive for takeovers in Finland. However, findings also indicate that hubris motive is legitime at certain extent, especially in 2000 - 2001. Moreover, the method of payment has important quality to elucidate merger performance. This paper postulates that firms generally experince lower announcement returns when bidding firms offer stock, rather than cash, as a payment. Furthermore, the acquirer pays its acquisition more often with stock, when its P/B and P/E-ratios are high. In general, target companies seem to perform well, they earn statistically significant positive abnormal return, 14%. On the other hand, the acquirer companies are receiving slightly positive but insignificant abnormal returns.
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