Mergers and Acquisitions

Paper Session

Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM

Sheraton Grand Chicago, Chicago Ballroom IX
Hosted By: American Finance Association
  • Chair: Isil Erel, Ohio State University

Vote Avoidance and Shareholder Voting in Mergers and Acquisitions

Kai Li
University of British Columbia
Tingting Liu
Creighton University
Julie Wu
University of Nebraska-Lincoln


Using a hand-collected sample of U.S. stock deals over the period 1995-2015, we examine whether and how the requirement of acquirer shareholder voting affects deal quality. We find evidence that acquirer management substitutes stock with cash to bypass shareholder voting, and that deals bypassing shareholder voting have lower announcement returns than those not. Employing a regression discontinuity design, we show a direct positive causal effect of shareholder voting on deal quality that is concentrated among acquirers with higher institutional ownership and acquirers buying targets with greater information asymmetries. We conclude that shareholder voting mitigates agency problems in mergers and acquisitions.

Predicting Merger Targets and Acquirers from Text

Bryan Routledge
Carnegie Mellon University
Stefano Sacchetto
University of Navarra
Noah Smith
University of Washington


We explore the use of a U.S. firm's SEC filings to predict whether the firm will be an acquirer or a target of an acquisition within a year of the filing. Our approach uses text regression, in which frequencies of words and phrases in the document are used as independent variables in a logistic regression model. We find that word and phrase features have significant predictive power in models of being an acquirer or a target. In each case, the best performing models involve a different use of text alongside standard financial variables.

Price and Probability: Decomposing the Takeover Effects of Anti-Takeover Provisions

Vicente Cunat
London School of Economics and Political Science
Mireia Gine
University of Navarra and University of Pennsylvania
Maria Guadalupe


This paper decomposes the expected takeover premium from adopting an anti-takeover
provision into three components (a causal effect on the takeover probability; a causal
effect on the premium paid; and a selection effect) and provides causal evidence on each
of those, thus being able to ascertain the contribution of each to shareholder value
creation from takeovers. Using data on shareholder-sponsored proposals to remove an
anti-takeover provision voted on in annual meetings of S&P 1500 firms between 1994
and 2013, we extend the regression discontinuity design using the approach in Angrist
and Rokkanen (2013) to provide causal estimates that do not rely only on firms around
the discontinuity. In order to account for selection in observed mergers we estimate sharp
bounds for the causal effect of anti-takeover provisions on the takeover premium (Lee,
2009). For an average firm, voting to remove an anti-takeover provision leads to a 4.5%
higher probability of being taken over and a 2.8% higher expected unconditional takeover
premium. We also find evidence that increased competition in takeover contests is one
driver of the estimated increased premium for firms that remove an anti-takeover
provision. Finally, we show that 53% of the shareholder gains come from the increased
probability of a takeover, with also significant shares for selection and premium effects.

Product Integration and Merger Success

Gerard Hoberg
University of Southern California
Gordon Phillips
Dartmouth College


We examine the importance of merger integration risk to the outcomes of mergers using new product-based ex ante measures of integration risk at the firm and firm-pair level. Our ex ante measures are significantly associated with ex post statements by managers in their 10-K indicating difficulties with merger integration and also employee retention issues. We find that firms performing acquisitions in high product integration risk markets experience lower ex post profitability, higher ex post expenses, and a higher propensity to divest assets. Upon announcement, acquirers experience lower announcement returns and targets experience significantly higher announcement returns when product integration risk is high. Examining long-term stock market returns, we find that the well-known anomaly that acquiring firms have lower longer-term stock returns primarily occurs in markets where product integration risk is high.
Andrey Malenko
Massachusetts Institute of Technology
Andrew Wu
University of Michigan
Rob Schonlau
Brigham Young University
Sergey Chernenko
Ohio State University
JEL Classifications
  • G3 - Corporate Finance and Governance