Do firms with soft budget constraint problem pay more in M&As? Evidence from Eastern Asia.

• Main Authors: Cheng-Jer Chung, 鍾政哲
• Other Authors: Chu-Hua Wu
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/22052470312494844339

碩士 === 元智大學 === 財務金融學程 === 99 === This paper, tries to examine the effects of soft budget constraints problem on acquisition decisions in emerging markets in Eastern Asia from 2000 to 2009. If the manager knows the shareholders will provide more funds (i.e. soft budget constraint), he may expand firm’s business scope by M&As to lurk his bad performance. Thus the manager will pay higher price to compete with other acquirers to make M&As successful. This paper first identifies firms with soft budget constraint, then develops a simple model of acquisition premium that takes the soft budget constraint into account. The result shows that firms with the soft budget constraint problem have higher intention of M&As and will pay more especially in those countries with weak legal protection of investors.