Social connections, reference point and acquisition premium

Guo, J. (M.), Li, X., Cisternas Seeger, N. and Vagenas-Nanos, E. (2019) Social connections, reference point and acquisition premium. British Accounting Review, 51(1), pp. 46-71. (doi:10.1016/j.bar.2018.07.001)

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Abstract

This paper examines the impact of acquirer-target social connections along with the target 52-week high (Baker et al., 2012) on acquisition premiums. We show that acquisition premium is more sensitive to first-degree connection than the reference point, suggesting that information is the main driving force for determining acquisition premiums. The findings also indicate that connected directors are more likely to favour firms where they hold higher positions and negotiate favourable premiums. Acquirers pay lower premiums when target directors are retained in the new entity. Connected acquirers are also more likely to finance their deals with equity. Overall, this paper provides support to the information flow hypothesis that acquirers with social connections have better access to target information and enhanced bargaining power in negotiations.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Vagenas-Nanos, Dr Evangelos
Authors: Guo, J. (M.), Li, X., Cisternas Seeger, N., and Vagenas-Nanos, E.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:British Accounting Review
Publisher:Elsevier
ISSN:0890-8389
ISSN (Online):1095-8347
Published Online:25 July 2018
Copyright Holders:Copyright © 2018 Elsevier Ltd.
First Published:First published in British Accounting Review 51(1): 46-71
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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