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Title: Zijn synergie, agency en hubris verklarende motieven voor Europese crossborder overnames?
Authors: Blaauwberg, Ronald
Keywords: Synergy
acquisition and behavioral finance
Issue Date: 5-Sep-2013
Publisher: Open Universiteit Nederland
Abstract: Why do acquisitions occur? Reasons for takeovers are divers, but most commonly are subject to these three major motives. Synergy motive: Acquisitions take place when the value of the combined firm is greater than the sum of the values of the individual firms. Agency (managerial) motive: Managers of the acquiring firm try to maximize their own utility at the expense of the shareholders of the (acquiring) firm. Hubris motive: Managers of the acquiring firm make mistakes in evaluating the target firm due to hubris in their behavior. The authors Berkovitch & Narayanan published in 1993 their research “Motives for takeover, An empirical investigation” They presume that existing empirical evidence is unable to clearly distinguish among these motives, due to simultaneous existence of all three, in any sample of takeovers. Existing empirical papers use average gains. Berkovitch & Narayanan overcome this problem by investigating the relation (correlation) between target gain and total gain and target gain and acquirer gain. The original research uses a database filled with 330 domestic American takeovers from 1963 through 1988. This thesis replicates the method of the original research by Berkovitch & Narayanan for 36 European crossborder takeovers from 1999 through 2009 with the main question: Are synergy, agency and hubris explanatory motives for European crossborder takeovers? The synergy motive and agency motive are situated under standard finance. The principles are perfect markets and rational decision makers. The standard market is unable to explain all developments on the market. The hubris motive arises when markets are not perfect and when decision makers behave not rational. These principles are in literature known as behavioral finance. For reliability it is important to select good data. The selected data are from acknowledged companies (Thomson One Banker and Zephyr) The replication model consists of four main steps: 1. To calculate for all takeovers the cumulative abnormal return for acquirer and target 2. To calculate for all takeovers market value for acquirer, target and total 3. To calculate for all takeovers gains for acquirer, target and total 4. To formulate and test the hypothesis to the outcome of the correlation between target gain and total gain and target gain and acquirer gain. If we compare the original research of Berkovitch & Narayanan with the replication thesis the results are largely consistent. The replication thesis scores a 56% positive total gain (original research 75%). Synergy is the primary motive for positive total gain without any evidence or indications for the hubris. Agency is the primary motive for negative total gain with evidence for managerial hubris. The intersection test shows no indications for hubris in the positive total gain nor negative total gain. In the replication thesis the motives are simpler determined. Evidence and indications for hubris are less present. The general conclusion is that the results of the replication thesis are largely consistent with the original research of Berkovitch & Narayanan.
Appears in Collections:MSc Management Science

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