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Can Failure Signal Success? Evidence from Withdrawn M&A Deals
| Content Provider | Semantic Scholar |
|---|---|
| Author | Mavis, Cp Alexandridis, George Terhaar, Lars Travlos, Nickolaos G. |
| Copyright Year | 2013 |
| Abstract | In a recent paper Jacobsen (2012) argues that the motive for withdrawing from acquisition deals can be used as an instrument to identify high quality CEOs. We employ a research design that allows us to examine whether CEOs that abandon acquisitions when the purchase price is no longer justifiable are in fact more focused on pursuing corporate investments that create superior value for shareholders. We find that CEOs that withdraw from potentially expensive deals make discernibly better acquisition decisions than the average CEO in their return to the market for corporate control, corroborating that the favourable market reaction around such withdrawals reflects a credible signal pointing to superior CEO quality in the M&A setting. We also show that this superior quality is not reflected in pre-withdrawal acquisition returns which implies that the positive information conveyed by price induced deal cancellations is novel and not previously available to the market. Overall, the results of this paper indicate that the acquisition withdrawal motive has important corporate investment and capital market implications for acquiring firms and their shareholders beyond the withdrawal announcement. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2013-Reading/papers/Can%20Failure%20Signal%20Success%20-%2020_6_2013.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
