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Article
Publication date: 4 July 2018

Won-Seok Woo, Suhyun Cho, Kyung-Hee Park and Jinho Byun

This paper aims to investigate the causes of mergers and acquisitions (M&A) deals that acquiring firms pay excess premium beyond the market-expected level and examine the relation…

585

Abstract

Purpose

This paper aims to investigate the causes of mergers and acquisitions (M&A) deals that acquiring firms pay excess premium beyond the market-expected level and examine the relation between the announcement return and long-term performance of the acquiring firms.

Design/methodology/approach

Based on a sample of 1,767 US firms’ M&A deals from 2000 to 2014, the authors use the expectation model used by Ang and Ismail (2015) to measure normal offer premium in an M&A deal. They conduct the standard event study methodology to observe the market reaction for acquiring companies on the announcement day. Buy-and-hold abnormal returns are used for the main explanatory variable so as to find the impact of the premium paid on the long-term performance of the acquirer.

Findings

First, acquiring firms are faced with negative market returns when acquiring firms pay excess premiums. Second, poor long-term performance of the acquiring firms is observed if acquiring firms pay excess premium. Finally, the negative relation between excess premium and acquiring firms’ long-term performance weakens, as the sample period becomes longer.

Research limitations/implications

The hypotheses and results of the empirical study are as follows. First, the acquirer’s market reaction on the announcement day is negative when it pays an excess offer premium. This is because the market perceives the premium to be greater than the value of the deal, which damages the value of the market, as it is not perceived as a proxy for future synergy. Second, the acquirer’s long-term performance is low when it pays the excess offer premium. It is the same result as the acquirer’s market reaction on the announcement day. This shows that the excess premium does not result in either a short-term positive reaction or a long-term profit for the acquiring shareholders. However, it is found that the relationship between the excess premium and the long-term performance of the acquirer decreases with time. This is because the long-term performance of the acquirer is more affected by management and other events after the deal.

Originality/value

The authors divide the total premium paid into the normal offer premium and the excess premium, and their focus is on the excess premium part. The main contribution of this paper is that it analyzes how the excess premium affects the market reaction on the announcement day and the long-term performance of acquiring firms.

Details

Studies in Economics and Finance, vol. 35 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 14 March 2022

Joonho Moon, Myungkeun Song, Won Seok Lee and Ji Min Shim

This study aims to explore the structural relationship among food quality, usefulness, ease of use, convenience, brand trust and willingness to pay. The technology acceptance…

2016

Abstract

Purpose

This study aims to explore the structural relationship among food quality, usefulness, ease of use, convenience, brand trust and willingness to pay. The technology acceptance model was used as the theoretical foundation of this work.

Design/methodology/approach

Amazon Mechanical Turk was used to recruit survey participants, and 436 valid observations were ultimately used for the analysis. In the data analysis, the structural relationships between variables were explored through structural equation modeling.

Findings

The results of hypothesis testing show that ease of use positively affects the usefulness of the Starbucks mobile application. Usefulness also exerts positive impacts on both brand trust and convenience. Moreover, brand trust is positively associated with food quality. Finally, willingness to pay is positively influenced by both convenience and brand trust.

Originality/value

This study contributes to the literature by not only validating the technology acceptance model using the Starbucks mobile application but also proposing food quality-related attributes in the domain of the café business.

Details

British Food Journal, vol. 125 no. 1
Type: Research Article
ISSN: 0007-070X

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