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Value is in the Eye of the Beholder: The Relative Valuation Roles of Earnings and Book Value in Merger Pricing

Author: MaryJane Rabier 

Publication: The Accounting Review, Vol. 93, No. 1, 2018, pp. 335-362

Abstract:

Gupta and Gerchek (2002) argue that different acquirers can arrive at different equity valuations for the same target depending on their strategic intent. A reason for acquirers' equity valuations to vary, holding target fundamentals constant, may be that individual acquirers place different weights on underlying fundamentals. I examine this possibility using Burgstahler and Dichev (1997)'s theoretical framework. They argue that the relative importance of earnings and book value depends on expected adaptation, which is the likelihood that the existing earnings generating process will be altered. Using restructuring costs to proxy for expected adaptation at the individual acquirer level, I find that the association between the target's earnings (book value) and acquirers' bid prices is decreasing (increasing) in expected adaptation, consistent with theoretical predictions. These findings are less pronounced during merger waves and intense bid competition for the target.

Read full article: The Accounting Review

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Published: 28 Sep 2017

Acquisition Motives and the Distribution of Acquisition Performance

Author: MaryJane Rabier

Publication: Strategic Management Journal, Vol. 38, No. 13, 2017

Abstract: 

Research summary:

I examine how acquisition motives relate to the distribution of post-acquisition performance. I argue that acquisitions motivated by operating synergies have the potential to experience greater gains than acquisitions driven by financial synergies but are harder to value and implement, making them more uncertain. Using SEC filings, conference calls and press releases to capture acquisition motives, I find that acquirers pursuing operating synergies are more likely to experience highly positive and highly negative long-term returns than acquirers pursuing financial synergies.

I also find that acquisition experience and geographic proximity to targets soften acquirers' extreme downside outcomes in operating synergy acquisitions. My theory and results suggest that approaches that emphasize average outcomes for acquirers and use industry classifications to capture acquisition motives may be incomplete.

Managerial summary: 

Managers engage in acquisitions for various reasons. In this study, I find that reasons related to operating synergies (e.g., revenue growth through new product offerings or cost savings through economies of scale) are more likely to result in extreme high and low performance outcomes for the acquiring firm compared to reasons related to financial synergies (e.g., diversification of cash flow streams).

In addition, I find that the acquirer's prior acquisition experience and the geographic proximity between the target and acquirer help soften the extreme low performance outcomes related to operating synergies. 

Read full article: Strategic Management Journal

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Published: 28 Sep 2017

Saurabh Mishra appointed to Editorial Review Board of JAMS

Saurabh Mishra, Associate Professor in Marketing, has been appointed to the Editorial Review Board of the Journal of the Academy of Marketing Science (JAMS).

JAMS is devoted to the study and improvement of marketing and serves as a vital link between scholarly research and practice by publishing research-based articles in the substantive domain of marketing.

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Published: 17 Aug 2017

Stock overreaction to extreme market events

Authors: Pedro Piccolia, Mo Chaudhury, Alceu Souza and Wesley Vieirada Silvaa

Publication: The North American Journal of Economics and Finance, Vol. 41, July 2017

Abstract:

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Published: 17 Aug 2017

Integrated fleet mix and routing decision for hazmat transportation: A developing country perspective

Authors: Anand Kumar, Debjit Roy, Vedat Verter and Dheeraj Sharma

Publication: European Journal of Operational Research, Forthcoming

Abstract:

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Published: 10 Aug 2017

Who’s Watching? Accountability in Different Audit Regimes and the Effects on Auditors’ Professional Skepticism

Authors: Florian Hoos,  Jorien Louise Pruijssers, Michel W. Lander

Publication: Journal of Business Ethics, Forthcoming

Abstract:

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Published: 12 Jul 2017

Leverage and asymmetric volatility: The firm-level evidence

Authors: Jan Ericsson, Xiao Huang, Stefano Mazzotta

Publication: Journal of Empirical Finance, Volume 38, Part A, September 2016, Pages 1-21

Abstract:

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Published: 12 Jul 2017

Managing Patient Admissions in a Neurology Ward

Authors: Saied Samiedaluie, Beste Kucukyazici, Vedat Verter, Dan Zhang

Publication: Operations Journal

Abstract:

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Published: 3 Jul 2017

Spirals of Spirituality: A Qualitative Study Exploring Patterns of Spiritual Organizing

Authors: Fahri Karakas and Emine Sarigöllü

Publication: Journal of Business Ethics, Forthcoming

Abstract:

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Published: 26 Jun 2017

Alfred Jaeger, Associate Professor in Organizational Behaviour wins Outstanding Paper

Professor Alfred Jaeger's paper entitled "Institution building and institutional voids: Can Poland’s experience inform Russia and Brazil?", which was published in the International Journal of Emerging Markets with co-authors S. M. Puffer and D. J....

Published: 15 Jun 2017

Institution building and institutional voids: Can Poland’s experience inform Russia and Brazil?

Authors: Sheila M. Puffer, Daniel J McCarthy and Alfred M Jaeger

Publication: International Journal of Emerging Markets, Vol. 11, No. 1, 2016

Abstract:

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Published: 15 Jun 2017

National network of researchers assesses Canada’s energy future

A new report co-authored by 71 researchers from across Canada, including Professor Dror Etzion of Desautels, examines how Canada could transition to low-carbon energy systems, while remaining globally competitive.

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Published: 29 May 2017

Omar Toulan appointed to Editorial Review Board of AMR

Omar Toulan, Associate Professor in Strategy & Organization was recently appointed to the Editorial Review Board of Academy of Management Review (AMR), one of the top ten most influential and frequently cited management journals.

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Published: 17 May 2017

Jui Ramaprasad appointed Associate Editor of MISQ

Jui Ramaprasad, Associate Professor in Information Systems was recently appointed Associate Editor of the Management Information Systems Quarterly (MISQ), a top management journal.

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Published: 16 May 2017

Jingjing Zhang awarded 2017 FRQSC New Academics Grant

Jingjing Zhang, Assistant Professor in Accounting, was recently awarded a 2017 FRQSC New Academics Grant for her project "Effet d’entraînement réglementaire transfrontalier : impact des réformes du processus de notation aux États-Unis sur la notation des obligations des sociétés canadiennes. / Cross-Border Regulatory Spillover: The Effect of U.S. Credit Rating Reforms on Canada’s Corporate Bond Ratings".

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Published: 15 May 2017

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