Diversification in M&As, Decision and shareholders' valuation

  1. Feito-Ruiz, Isabel
  2. Menéndez Requejo, Susana
Revista:
The Spanish Review of Financial Economics

ISSN: 2173-1268

Año de publicación: 2012

Volumen: 10

Número: 1

Páginas: 30-40

Tipo: Artículo

DOI: 10.1016/J.SRFE.2012.03.001 DIALNET GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: The Spanish Review of Financial Economics

Objetivos de desarrollo sostenible

Resumen

The aim of this paper is to analyze the diversification decision in Mergers and Acquisitions (M&As) and how this decision is valued by acquiring shareholders, considering the influence of the legal and institutional environment. Using a sample of 447 M&As announced by European firms, which acquire a target in any country in the world over the period 2002�2007, we find that the weak legal and institutional environment in the bidder country has a positive impact on the diversification decision. After controlling the diversification endogeneity, we observe that acquiring shareholders value diversified M&As negatively in countries with strong legal and institutional environment. This result indicates that the benefits of the internal capital market effect dominate the agency conflicts� effect. We also observe that acquiring firms with concentrated ownership structures value diversified M&As negatively in countries with strong legal and institutional environment.

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Información de financiación

We thank participants at the International Risk Management Conference in Amsterdam (2011), the International Finance and Banking Society Conference (IFABS) in Rome (2011), and the ACEDE Conference in Barcelona (2011) for their helpful comments and suggestions. Financial support from the Spanish Science and Innovation Ministry ( MICINN-09-ECO2009-11758 ) is gratefully acknowledged. Isabel Feito also acknowledges the financial support of the Fundación para el Fomento en Asturias de la Investigación Científica Aplicada y la Tecnología (FICYT) .

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