Title: Revenue enhancement through mergers and acquisitions: wealth effects of method of payment

Authors: Jianyu Ma; José A. Pagán; Yun Chu; Gökçe Soydemir

Addresses: School of Business, Robert Morris University, Moon Township, Pennsylvania 15108, USA. ' School of Public Health, University of North Texas Health Science Center, Fort Worth, Texas 76107, USA. ' School of Business, Robert Morris University, Moon Township, Pennsylvania 15108, USA. ' Foster Farms Endowed Professor of Business Economics, California State University Stanislaus, Turlock, California 95382, USA

Abstract: Many firms enhance revenue through mergers and acquisitions deals because synergy occurs when the value of the combined firm after the merger is greater than the sum of the value of the bidding firm and the value of the target firm before the merger. This paper analyses value creation of mergers and acquisitions in ten Asian emerging markets over the past 12 years. The stock markets react positively to M&A deals around the time of the announcement in spite of variation in the method of payment or the types of the target form. Method of payment affects abnormal returns. The difference between cash only payment and stock only payment is statistically significant. When the target is a private firm or a subsidiary, bidder firms realise higher positive abnormal returns than that when the target is a public firm. However, the differences (public vs. private and public vs. subsidiary) are not statistically significant at conventional levels.

Keywords: revenue enhancement; mergers and acquisitions; M&A; abnormal returns; emerging markets; payment methods; revenue management; wealth effects; stock markets.

DOI: 10.1504/IJRM.2012.050402

International Journal of Revenue Management, 2012 Vol.6 No.3/4, pp.274 - 290

Published online: 17 Nov 2012 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article