An Exchange Ratio Determination Model for Holding Company Mergers:A Comparison of L-G model and Real Options

• Main Authors: Pei-Jung Chen, 陳姵蓉
• Other Authors: 劉祥熹
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/54931291591051826539

碩士 === 國立臺北大學 === 統計學系 === 94 === Holding company’s stock often responses it’s market value, investors’ rights and interests, so as holding companies merger, the exchange ratio of the target company’s stock to acquiring company’s stock can show the value between the two holding companies. This research focus on “the common stock exchange” and do some simulation researches while holding companies merger. This research uses two approaches to calculate exchange ratio, one is Larson and Gonedes model (L-G model) which can calculate the exchange ratio directly. The other one is an real option model extended by Schwartz and Moon which can valued a company’s true value, and calculate the company’s stock price as well as the exchange ratio. Finally, this research uses five important indexes to evaluate the validity of these two approaches. Mergers between holding companies will be a trend in the future. Through releasing official stocks to merge holding companies can reach the target of reducing not only the number of holding companies but also official stocks companies. Therefore, this research chooses 28 kinds of situations to simulate their merger activities. The conclusions are the exchange ratio calculated by L-G model seems a proper model, however, the real option approach could estimate the true value with past information. Generally speaking, the results of this research can provide some information for the government authority, holding companies and investors to do decision-making more appropriately.