The Effect of a Merger of a Financially Distressed Company on Control Premium

• Main Authors: Yuan-Xing Huang, 黃源興
• Other Authors: 王泰昌
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/26689817684762102933

碩士 === 國立臺灣大學 === 會計學研究所 === 104 === This study explores the negotiation between two parties of a merger, the firm is to be merged due it financial distress and the merging one; the impact on stock return ratio of the company that merged the other one, and issues such as effect on control premium due to information asymmetric. Merger is one of the most major strategies for an enterprise to expand its size; however we wonder, if choosing a company with financial difficulty to be a target of merger any good to the merging company? Finally, we explore the impact on right of control by information asymmetric. This study is done with experimental study to prove that, while a company with financial distress is being merged, since the seller has worse negotiation ability, it will eventually reduce the price the buyer determines to pay. Therefore, we need to prevent the circumstance that, the merging company is convinced by its over self-confidence, proposed by Roll (1986), and motivates its stock price to react with an abnormal return due to multiple effects of such merger. Moreover, this study points out that, after the implementation of Sarbanes-Oxley Act in 2002, it reduced the information asymmetric between controlling shareholders and non-controlling shareholders and finally further reduced the control premium.