The behavioral financial decision model on merge and acquisition: An empirical study for Taiwan financial holding corporations

• Main Authors: Hung-Ta Lee, 李宏達
• Other Authors: Chuang-Yuang Lin
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/68610471981953739624

博士 === 國立臺北大學 === 企業管理學系 === 95 === This paper investigates the performances and motivations on merge and acquisition (M&A) activities for 14 financial holding corporations (FHCs) of Taiwan. Although the decision makers announce that, M&A can help acquirer increase size and market share, there also exist various different opinions on literatures that M&A may or may not create synergies. On the other hand, there are literatures illustrating that, different motivations would induce different behaviors and performances on M&A. Therefore, this paper measures the performances after FHCs establishment first, to verify whether FHCs perform better or not. Secondary, identifies the motivations on M&A, and explains it by behavioral financial theory. Finally, tries to establish a behavioral oriented financial model to integrate the motivations, performances, and policies, which operate on financial markets simultaneously. For empirical studies, this paper selects 27 quarterly financial indexes of FHCs and subsidiaries of banking, insurance, and securities firms during 1997-2006, applies the factor analysis techniques to decrease the data loading and extract the factors. Secondly, defines the factors as independent variables and the computed Tobin Q as dependent variables to run 4 multi-regression models, to ensure whether the factors can explain the performances or not. As a result, the profitability is positively and the operation is negative statistically significant, indicating the non-performing loans (NPL) ratio would change the direction of regression equations. Thereafter, this paper distinguishes the performances among FHCs and their subsidiaries after established via T-test, which find the profitability of both FHCs and subsidiaries perform better year by year, but the operating performance of FHCs and banks are getting worse, insurance subsidiaries perform better significantly, and securities firms perform the same as before. Also, this paper tests the differences of performances during prior and posterior 5 years of FHCs establishment, which find no evidences for better performances after FHCs operated. In order to verify the conclusions described above, this paper suggests the backpropagation method of artificial neural network as robustness to test, and the results can support the same conclusions. In order to clarify the motivations of M&A, this paper introduces the qualitative methods to analyze. For equity maximum hypothesis, there exist no strong evidences to support the diversification of profit structure, the strength of competitiveness, and the efficiency of capital raising, but the linkage taxation system provide an attractive reason for FHCs to merge continuously. For equity non-maximum hypothesis, this paper finds FHCs pay premiums for acquired firms and support the hubris hypothesis exists, and the existing optimism phenomenon encourage managers to invest on the projects that net present value lower than zero. However, M&A can increase the benefits of directors and managers, especially on the lower shareholding percentages cases, but the benefits of shareholders are decreasing simultaneously. Because of M&A activities can broaden the size of corporations quickly, managers would extend their managerial power meanwhile, although the numbers of employees, salaries, and operating expenses increase after M&A, but the sales and earnings are not increase to the same extent, indicating the performances are not better than before, which support the hypothesis that M&A can not increase the performances of acquiring FHCs. Finally, this paper proposes a behavioral oriented financial model, identifies both the psychological factors and governmental policies would influence the motivations on M&A, and the performances improvement would be the reason that decision makers seeking financial market to support M&A. However, if FHCs perform better after M&A, the activities would operate continuously. On the other hand, because of the firm size broadened after M&A, the supervisory power of capital markets would become weaker relatively, to push the M&A operate continuously even the performances are not better than before.