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Two Essays on Mergers and Acquisitions
Title
Two Essays on Mergers and Acquisitions
Creator
Xu, Yang
Date
2024
Description
This dissertation is composed of two self-contained chapters that both relate to mergers and acquisitions (M&A). In the first essay, we...
Show moreThis dissertation is composed of two self-contained chapters that both relate to mergers and acquisitions (M&A). In the first essay, we examine the Delaware (DE) reincorporation effect on firms’ post-IPO behaviors on mergers and acquisitions. We find that firms’ DE reincorporation decisions enhance the likelihood of engaging in M&A as targets. However, as a tradeoff, DE reincorporated firms get lower takeover valuations compared to stay-at-home-state firms, and the acquisition of reincorporated firms is less likely to be successful. Our second essay aims to explore the role of the options market in price discovery for M&A. We find that the predictive power of the changes in implied volatility of the target firm stock for the takeover outcome is statistically and economically significant. The risk arbitrage portfolios incorporating filters derived from the options on stocks of the target firms generate annualized risk-adjusted abnormal returns between 2.6% and 5%, depending on the portfolio weighting method, the threshold of filters for the implied volatility change, and the asset pricing models applied for abnormal returns. The results are robust to different empirical setups and are not explained by traditional factors.
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Two Essays on Mergers and Acquisitions
Title
Two Essays on Mergers and Acquisitions
Creator
Xu, Yang
Date
2024
Description
This dissertation is composed of two self-contained chapters that both relate to mergers and acquisitions (M&A). In the first essay, we...
Show moreThis dissertation is composed of two self-contained chapters that both relate to mergers and acquisitions (M&A). In the first essay, we examine the Delaware (DE) reincorporation effect on firms’ post-IPO behaviors on mergers and acquisitions. We find that firms’ DE reincorporation decisions enhance the likelihood of engaging in M&A as targets. However, as a tradeoff, DE reincorporated firms get lower takeover valuations compared to stay-at-home-state firms, and the acquisition of reincorporated firms is less likely to be successful. Our second essay aims to explore the role of the options market in price discovery for M&A. We find that the predictive power of the changes in implied volatility of the target firm stock for the takeover outcome is statistically and economically significant. The risk arbitrage portfolios incorporating filters derived from the options on stocks of the target firms generate annualized risk-adjusted abnormal returns between 2.6% and 5%, depending on the portfolio weighting method, the threshold of filters for the implied volatility change, and the asset pricing models applied for abnormal returns. The results are robust to different empirical setups and are not explained by traditional factors.
Show less
Two Essays on Mergers and Acquisitions
Title
Two Essays on Mergers and Acquisitions
Creator
Xu, Yang
Date
2024
Description
This dissertation is composed of two self-contained chapters that both relate to mergers and acquisitions (M&A). In the first essay, we...
Show moreThis dissertation is composed of two self-contained chapters that both relate to mergers and acquisitions (M&A). In the first essay, we examine the Delaware (DE) reincorporation effect on firms’ post-IPO behaviors on mergers and acquisitions. We find that firms’ DE reincorporation decisions enhance the likelihood of engaging in M&A as targets. However, as a tradeoff, DE reincorporated firms get lower takeover valuations compared to stay-at-home-state firms, and the acquisition of reincorporated firms is less likely to be successful. Our second essay aims to explore the role of the options market in price discovery for M&A. We find that the predictive power of the changes in implied volatility of the target firm stock for the takeover outcome is statistically and economically significant. The risk arbitrage portfolios incorporating filters derived from the options on stocks of the target firms generate annualized risk-adjusted abnormal returns between 2.6% and 5%, depending on the portfolio weighting method, the threshold of filters for the implied volatility change, and the asset pricing models applied for abnormal returns. The results are robust to different empirical setups and are not explained by traditional factors.
Show less