Financial Constraints, Growth and M&As: The Target Firms

• Main Authors: Bo-Chang Chen, 陳柏璋
• Other Authors: Yenn-Ru Chen
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/70030909616053749118

碩士 === 國立成功大學 === 財務金融研究所 === 97 === Due to the imperfection of the market, financial condition plays an important role in determining firm’s investment decision and future operating performance. In order to maintain competitive advantage, the high demand of investment motives growing firms to seek out financial resources from other firms. We examine the effect of firm’s growth and financial constraints on the likelihood of being acquired. Our results find that among financially constrained firms, firms with higher growth are more likely to become target firms than firms with lower growth. In addition, among the growing firms, firms without financial constraint are more likely to be acquired than firms with financial constraint. The test of postmerger performance exhibits that acquiring growing firms with high growth benefits bidder’s long-term postmerger performance. However the operating performance improvement does not reflect on the long-term stock returns for bidder. Our finding supports that acquiring target firms with growth-resources mismatch create value. The synergies increase the likelihood of high growth and financially constrained firms to be acquired, but the financial synergies cannot motive bidders to acquire financially constrained firms effectively.