Separation of Control and Cash-Flow Rights of State Owned Listed Enterprises: Channels of Expropriation after the Discriminated Share Reform in China

Literature on agency problems arising between controlling and minority owners claim that separation of cash flow and control rights allows controllers to expropriate listed firms, and further that separation emerges when dual class shares or pyramiding corporate structures exist. Dual class share and pyramiding coexisted in listed companies of China until discriminated share reform was implemented in 2005. This paper presents a model of controller to expropriate behavior as well as empirical tests of expropriation via particular accounting items and pyramiding generated expropriation. Results show that expropriation is apparent for state controlled listed companies. While reforms have weakened the power to expropriate, separation remains and still generates expropriation. Size of expropriation is estimated to be 7 to 8 per cent of total asset at mean. If the "one share, one vote" principle were to be realized, asset inflation could be reduced by 13 percent.

Impact of foreign capital entry in the Indonesian banking sector

After the Asian financial crisis of 1997/98, the Indonesian banking sector experienced significant changes. Ownership structure of banking sector is substantially-changed. Currently, ownership of major commercial banks is dominated by foreign capital through acquisition. This paper examines whether foreign ownership changes a bank’s lending behavior and performance. Foreign banks tend to lend mainly to large firms; this paper examines whether the credit to small and medium-sized enterprises (SMEs) is affected by foreign capital entry into the Indonesian banking sector. Empirical results show that banks owned by foreign capital tend to decrease SME credit.

Boards of directors and bank performance in United Arab Emirates

This study presents an empirical analysis about corporate governance of financial institutions in United Arab Emirates (UAE). The purpose of this research is to analyze the influence of the structure of board of directors on the performance of these institutions. To examine the effect of control exerted by particular families on bank management, we estimated models where the dependent variable is return on assets (ROA) and return on equity (ROE), independent variables are board of directors variables, and control variables are bank management variables. Our results show that the control of corporate governance by a ruler's family within a board of directors has a positive effect on bank profitability. Our results indicate that control by a ruler's family through a bank's board of directors compensates for the inadequacy of UAE's corporate governance system.

Mergers and Acquisitions in Vietnam’s Emerging Market Economy, 1990-2009

This paper is the first major and thorough study on the M&A activities in Vietnam’s emerging market economy, covering almost entirely the M&A history after the launch of Doi Moi. The surge in these activities since mid-2000s by no means incidentally coincides with the jump in FDI and FPI inflows into the nation. M&A industry in Vietnam has its socio-cultural traits that could help explain economic happenings, with anomalies and transitional characteristics, far better than even the most complete set of empirical data. Proceeds from sales of existing assets and firms have mainly flowed into the highly speculative industries of securities, banking, non-bank financials, portfolio investments and real estates. The impacts of M&A on Vietnam’s long-term prosperity are, thus, highly questionable. An observable high degree of volatility in the M&A processes would likely blow outthe high ex ante expectations by many speculators, when ex post realizations finally arrive. The effect of the past M&A evolution in Vietnam has been indecisively positive or negative, with significant presence of rent-seeking and likelihood of causing destructive entrepreneurship. From a socio-economic and cultural view, the degree of positive impacts it may result in for domestic entrepreneurship will perhaps be the single most important indicator.

Trade Liberalization and the Profitability of Domestic Mergers.

It is often thought that a tariff reduction, by opening up the domestic market to foreign firms, should lessen the need for a policy aimed at discouraging domestic mergers. This implicitly assumes that the tariff in question is sufficiently high to prevent foreign firms from selling in the domestic market. However, not all tariffs are prohibitive, so that foreign firms may be present in the domestic market before it is abolished. Furthermore, even if the tariff is prohibitive, a merger of domestic firms may render it nonprohibitive, thus inviting foreign firms to penetrate the domestic market. In this paper, we show, using a simple example, that in the latter two cases, abolishing the tariff may in fact make the domestic merger more profitable. Hence, trade liberalization will not necessarily reduce the profitability of domestic mergers.

The international regulation of transnational mergers

Transnational mergers are mergers involving firms operating in more than one jurisdiction, or which occur in one jurisdiction but have an impact on competition in another. Being of this nature, they have the potential to raise competition law concerns in more than one jurisdiction. When they do, the transaction costs of the merger to the firms involved, and the competition law authorities, are likely to increase significantly and, even where the merger is allowed to proceed, delays are likely to occur in reaping the benefits of the merger. Ultimately, these costs are borne by consumers. This thesis will identify the nature and source of regulatory costs associated with transnational merger review and identify and evaluate possible mechanisms by which these costs might be reduced. It will conclude that there is no single panacea for transnational merger regulation, but that a multi-faceted approach, including the adoption of common filing forms, agreement on filing and review deadlines and continuing efforts toward increasing international cooperation in merger enforcement, is needed to reduce regulatory costs and more successfully improve the welfare outcomes to which merger regulation is directed.

The valuation accuracy of multiples in mergers and acquisitions, and their association with firm misvaluation

This study explores the accuracy and valuation implications of the application of a comprehensive list of equity multiples in the takeover context. Motivating the study is the prevalent use of equity multiples in practice, the observed long-run underperformance of acquirers following takeovers, and the scarcity of multiplesbased research in the merger and acquisition setting. In exploring the application of equity multiples in this context three research questions are addressed: (1) how accurate are equity multiples (RQ1); which equity multiples are more accurate in valuing the firm (RQ2); and which equity multiples are associated with greater misvaluation of the firm (RQ3). Following a comprehensive review of the extant multiples-based literature it is hypothesised that the accuracy of multiples in estimating stock market prices in the takeover context will rank as follows (from best to worst): (1) forecasted earnings multiples, (2) multiples closer to bottom line earnings, (3) multiples based on Net Cash Flow from Operations (NCFO) and trading revenue. The relative inaccuracies in multiples are expected to flow through to equity misvaluation (as measured by the ratio of estimated market capitalisation to residual income value, or P/V). Accordingly, it is hypothesised that greater overvaluation will be exhibited for multiples based on Trading Revenue, NCFO, Book Value (BV) and earnings before interest, tax, depreciation and amortisation (EBITDA) versus multiples based on bottom line earnings; and that multiples based on Intrinsic Value will display the least overvaluation. The hypotheses are tested using a sample of 147 acquirers and 129 targets involved in Australian takeover transactions announced between 1990 and 2005. The results show that first, the majority of computed multiples examined exhibit valuation errors within 30 percent of stock market values. Second, and consistent with expectations, the results provide support for the superiority of multiples based on forecasted earnings in valuing targets and acquirers engaged in takeover transactions. Although a gradual improvement in estimating stock market values is not entirely evident when moving down the Income Statement, historical earnings multiples perform better than multiples based on Trading Revenue or NCFO. Third, while multiples based on forecasted earnings have the highest valuation accuracy they, along with Trading Revenue multiples for targets, produce the most overvalued valuations for acquirers and targets. Consistent with predictions, greater overvaluation is exhibited for multiples based on Trading Revenue for targets, and NCFO and EBITDA for both acquirers and targets. Finally, as expected, multiples based Intrinsic Value (along with BV) are associated with the least overvaluation. Given the widespread usage of valuation multiples in takeover contexts these findings offer a unique insight into their relative effectiveness. Importantly, the findings add to the growing body of valuation accuracy literature, especially within Australia, and should assist market participants to better understand the relative accuracy and misvaluation consequences of various equity multiples used in takeover documentation and assist them in subsequent investment decision making.

Measuring the effects of mergers and acquisitions on the economic performance of real estate developers

Real estate developers in China are using mergers and acquisitions (M&As) to ensure their survival and competitiveness. However, no suitable method is yet available to assess whether such M&As provide enhanced value for those involved. Using a hybrid method of data envelopment analysis (DEA) and Malmquist total factor productivity (TFP) indices, this paper evaluates the short and medium term effects of M&As on acquirers’ economic performance with a set of 32 M&A cases occurring during 2000–2011 in China. The results of the analysis show that M&As generally have a positive effect on acquirers’ economic performance. Acquisitions on average experienced a steady growth in developer Malmquist TFP, a more progressive adoption of technology immediately after acquisition, a slight short-term decrease in technical efficiency after acquisition but followed by a marked increase in the longer term once the integration and synergy benefits were realised. However, there is no evidence to show whether developers achieved any short or long term scale efficiency improvements after M&A. The findings of this study provide useful insights on developer M&A performance from an efficiency and productivity perspective.

Generation of rotationally dominated galaxies by mergers of pressure-supported progenitors

Through the analysis of a set of numerical simulations of major mergers between initially non-rotating, pressure-supported progenitor galaxies with a range of central mass concentrations, we have shown that: (1) it is possible to generate elliptical-like galaxies, with outside one effective radius, as a result of the conversion of orbital- into internal-angular momentum; (2) the outer regions acquire part of the angular momentum first; (3) both the baryonic and the dark matter components of the remnant galaxy acquire part of the angular momentum, the relative fractions depending on the initial concentration of the merging galaxies. For this conversion to occur the initial baryonic component must be sufficiently dense and/or the encounter should take place on an orbit with high angular momentum. Systems with these hybrid properties have recently been observed through a combination of stellar absorption lines and planetary nebulae for kinematic studies of early-type galaxies. Our results are in qualitative agreement with these observations and demonstrate that even mergers composed of non rotating, pressure-supported progenitor galaxies can produce early-type galaxies with significant rotation at large radii.

A Recursive Perspective on Discursive Legitimation and Organizational Action in Mergers and Acquisitions

This paper challenges the predominant view that legitimation is merely a specific phase in merger or acquisition processes. We argue that a better understanding of postmerger organizational dynamics calls for conceptualization of discursive legitimation as an inherent part of unfolding merger processes. In particular, we focus on the recursive relationship between legitimation and organizational action. We have two objectives: to outline a theoretical model that helps one to understand the dynamics of discursive legitimation and organizational action in postmerger organizations, and to examine a revealing case to distinguish the inherent risks and problems in discursive legitimation. Our case analysis focuses on the merger between the French pharmaceutical companies BioMérieux and Pierre Fabre. We adopt a critical multimethod approach and distinguish specific discursive dynamics and pathological tendencies in this case. The analysis highlights the unintended consequences of discursive legitimation, the central role of sensegiving and sensehiding in discursive legitimation, the inherently political nature of legitimation and the risks associated with politicization, the special problems associated with fashionable discourses and the role of the media, the use of specific discursive strategies for legitimation and delegitimation, and the crucial role of actual integration results. This analysis adds to the existing research on mergers and acquisitions by treating discursive legitimation as part of the merger dynamics. In particular, our case analysis provides a new explanation for merger failure. We also believe that the recursive model connecting discursive legitimation and delegitimation strategies to concrete organizational action makes a more general contribution to our understanding of organizational legitimation.

The international match: Metaphors as vehicles of social identity building in cross-border mergers

This article focuses on cultural identity-building in the cross-border merger context. To provide an alternative to the dominant essentialist analyses of cultures and cultural differences, cultural identitybuilding is conceptualized as a metaphoric process. The focus is on two processes inherent in the cross-border merger context: construction of images of Us and Them and construction of images of a Common Future. Based on an analysis of a special metaphor exercise carried out in a recent Finnish–Swedish merger, the article illustrates how the metaphoric perspective reveals specific cognitive, emotional and political aspects of cultural identity-building that easily remain ‘hidden’ in the case of more traditional approaches.

The slowing down of galaxy disks in dissipationless minor mergers

We have investigated the impact of dissipationless minor galaxy mergers on the angular momentum of the remnant. Our simulations cover a range of initial orbital characteristics, and the system consists of a massive galaxy with a bulge and disk merging with a much less massive (one-tenth or one-twentieth) gasless companion that has a variety of morphologies (disk-or elliptical-like) and central baryonic mass concentrations. During the process of merging, the orbital angular momentum is redistributed into the internal angular momentum of the final system; the internal angular momentum of the primary galaxy can increase or decrease depending on the relative orientation of the orbital spin vectors (direct or retrograde), while the initially nonrotating dark matter halo always gains angular momentum. The specific angular momentum of the stellar component always decreases independently of the orbital parameters or morphology of the satellite, the decrease in the rotation velocity of the primary galaxy is accompanied by a change in the anisotropy of the orbits, and the ratio of rotation speed to velocity dispersion of the merger remnant is lower than the initial value, not only because of an increase in the dispersion but also of the slowing-down of the disk rotation. We briefly discuss several astrophysical implications of these results, suggesting that minor mergers do not cause a "random walk" process of the angular momentum of the stellar disk component of galaxies, but rather a steady decrease. Minor mergers may play a role in producing the large scatter observed in the Tully-Fisher relation for S0 galaxies, as well as in the increase of the velocity dispersion and the decrease in upsilon/sigma at large radii as observed in S0 galaxies.

Varities of National Metonymy in Media Accounts of International Mergers and Acquisitions

International mergers and acquisitions (M&As) often invoke national identification and national cultural differences. We argue that metonymy is a central linguistic resource through which national cultural identities and differences are reproduced in media accounts of international M&As. In this paper, we focus on two revealing cases: the acquisition of American IBM Personal Computer Division (PCD) by the Chinese company Lenovo and the acquisition of American Anheuser-Busch (A-B) by the Belgian-Brazilian company InBev. First, we identify the forms, functions and frequencies of national metonymy in media accounts of these cases. We present a typology that classifies varieties of national metonymy in international M&As. Second, we demonstrate how these metonyms combine with metaphor to generate evocative imagery, engaging wit, and subversive irony. Our findings show that national metonymy contributes to the construction of emotive frames, stereotypes, ideological differences, and threats. Combinations of national metonymy with metaphor also provide powerful means to construct cultural differences. However, combinations of metonymy with wit and irony enable the play on meanings that overturns and resists national and cultural stereotypes. This is the first study to unpack the deployment of metonymy in accounts of international M&As. In doing so, it also opens up new avenues for research into international management and the analysis of tropes in management and organization.