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%0 Thesis
%A Ghufran, Bushra
%T The role of behavioral factors in the success of mergers and acquisitions
%I Rheinisch-Westfälische Technische Hochschule Aachen
%V Dissertation
%C Aachen
%M RWTH-2020-12171
%P 1 Online-Ressource (x, 234 Seiten) : Illustrationen
%D 2020
%Z Veröffentlicht auf dem Publikationsserver der RWTH Aachen University 2021
%Z Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2020
%X Mergers and acquisitions (M</td><td width="150">
%X As) are carried out to be competitive in the market and to grow rapidly by capitalizing on some kind of synergies. However, many mergers and acquisitions fail due to cultural dissimilarities, agency problems, and integration issues. I seek to add to the M</td><td width="150">
%X A-related literature in order to create better comprehension of the underlying reasons of frequent M</td><td width="150">
%X A failures, however, from a different viewpoint by taking into account ‘behavioral’ element. I strive to see through the investors’ and managers’ preferences to comprehend how their preferences affect post-merger takeover performance in the long run. I begin with investigating investors’ preferences with respect to time, by employing cultural measure on long-term orientation (LTO), and the role of these preferences in defining takeover outcomes. By analyzing a large international sample on M</td><td width="150">
%X A deals, I offer a strong empirical evidence that investors’ time preferences have a considerable impact on long-term takeover performance. I offer empirical evidence that investors’ future orientation causes a significant improvement in takeover returns, on the other hand short-term orientation results in deteriorated takeover outcomes. I further observe that the significance of investors’ long-term orientation is stronger in countries with higher level of investor protection and for domestic deals with lower level of cultural disparities. Next, I use national culture based characteristics of individualism, uncertainty avoidance, and masculinity to investigate managerial preferences and their likely impact on long-term post-acquisition performance for the acquirers. There are certain cultural characteristics that shape managerial preferences and by doing so may cast a substantial influence on takeover performance over an extended period. I analyze a large international sample on takeover deals and conclude that national culture has a significant impact of takeover outcomes in a long run. I witness that the higher level of individualism and uncertainty avoidance prevailing in the country result in reduced level of post-acquisition risk, suggesting the presence of managerial entrenchment that ultimately reduces takeover returns. Masculinity is found to have a positive impact on deal size, signifying the presence of empire building, however, contrary to my expectations; it does not cast any damaging impact on takeover outcomes. It clearly suggests that the positive attributes connected with masculinity (e.g. assertiveness, competitiveness, and toughness) have more profound impact as compared to the negative impact of empire building. I further observe that my findings are stronger in the case of domestic deals and for less globalized firms due to lower level of cultural dissimilarities. Next, I analyze the use of positive and negative language in financial disclosures and the ability of such language to predict long-term gains to the acquirers. In order to predict long-term takeover performance, I apply textual analysis to the MD</td><td width="150">
%X A Section of SEC filings (10-K Form) for M</td><td width="150">
%X A deals taking place in the United States. My overall findings reveal that a negative managerial tone has a strong negative association with takeover performance, whereas a positive managerial tone indicates managerial confidence in merger success, and hence reflects an enhanced takeover performance over an extended period. The evidence clearly rejects the hypothesis that a positive managerial tone is interpreted as managerial ‘overconfidence’ in a merger’s success. My findings also affirm that the predictive power of a negative tone is far more pronounced than that of a positive tone and of any other sentiment word lists. Moreover, stock returns do not adjust to the textual description immediately due to investors’ general inattentiveness and inability to process subtle textual information more accurately. I also observe that the significance of predictive power of a negative managerial tone gains strength in the post-crisis period and for cross-border and for riskier deals due to the comparatively higher uncertainty associated with evaluating such deals on the basis of ‘hard information’. Finally, I investigate the usage of virtuous language in the management discussion and analysis (MD</td><td width="150">
%X A) section of SEC filings (10-K Form) and the prognostic power of such language for takeover performance. The empirical results, based on textual analysis, reveal that trust is negatively associated with long-term takeover performance, suggesting that managerial virtuous talk is, in practicality, an indication of lower post-acquisition gains for the acquirers in the long run. Furthermore, takeover returns are found to reflect textual information on trust with a delay, owing to general inattention and inability of investors to process soft cues inherent in textual content and to managers purposefully lulling investors to keep them from paying attention and identifying managerial misconduct. Quite interestingly, the significance of virtuous talk becomes more evident in the post-crisis period due to relatively higher uncertainty linked with evaluating such kind of deals on the basis of hard information alone. Finally, an inflated virtuous talk when coupled with pessimistic tone, the ability of managerial ‘good talk’ to create a trustworthy image and to distract investors reduces and the predictive power of managerial trust talk increases even more. Overall, it is concluded that managerial virtuous talk should not be regarded as a ‘cheap talk’. It is, in fact, very pertinent for predicting future takeover returns in the long run.
%F PUB:(DE-HGF)11
%9 Dissertation / PhD Thesis
%R 10.18154/RWTH-2020-12171
%U https://publications.rwth-aachen.de/record/808596