Impact of Japanese Mergers on Shareholder Wealth: An Analysis of Bidder and Target Companies

25 Pages Posted: 16 Jun 2008

See all articles by Vikas Mehrotra

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Dimitri van Schaik

PricewaterhouseCoopers, Netherlands

J. Spronk

Erasmus Research Institute of Management (ERIM)

Onno W. Steenbeek

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); APG All Pensions Group

Date Written: February 2008 6,

Abstract

The market for corporate control in the second largest economy in the world behaves very different from that in the U.S. Using a sample of 91 mergers in the period 1982-2003 we document several distinctive features of this market in Japan. First, we show that in stark contrast to the pro-cyclical U.S. merger waves, mergers in Japan tend to be counter-cyclical, both with respect to the general economy as well as with respect to stock market valuations. Second, and again in contrast to the U.S. experience, we find that a significant fraction of Japanese mergers are orchestrated by the main banks; in such cases, mergers are not between two weak companies, but at least one of the merging companies is financially strong. Other distinctive features of Japanese mergers are the positive pre-announcement returns accruing to both bidders and targets, with bidders capturing approximately half the gains that accrue to target firms. We also find differential shareholder wealth effects in the bubble period (1982-1989), the early 1990s, and the post-financial regulation regime (1997-2003). Overall our results point to a market for corporate control that is distinctly less shareholder-centered than that in the U.S. and one where creditors play an important, perhaps dominant, role.

Keywords: Japanse mergers, corporate control, mergers, take-over

JEL Classification: G3, M, G34

Suggested Citation

Mehrotra, Vikas and van Schaik, Dimitri and Spronk, Jaap and Steenbeek, Onno W., Impact of Japanese Mergers on Shareholder Wealth: An Analysis of Bidder and Target Companies (February 2008 6,). ERIM Report Series Reference No. ERS-2008-032-F&A. Available at SSRN: https://ssrn.com/abstract=1144983

Vikas Mehrotra (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

Dimitri Van Schaik

PricewaterhouseCoopers, Netherlands ( email )

Netherlands

Jaap Spronk

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Onno W. Steenbeek

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

Dept. of Finance, H14-1
P.O. Box 1738
3000 DR Rotterdam, 3000DR
Netherlands
+31-10-4081400 (Phone)
+31-10-4089165 (Fax)

HOME PAGE: http://people.few.eur.nl/steenbeek/

APG All Pensions Group ( email )

Gustav Mahlerplein 3
P.O. Box 75283
1070 AG Amsterdam
Netherlands
+31-20-6049122 (Phone)
+31-20-4059176 (Fax)

HOME PAGE: http://www.apg.nl

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