The Effect of Bank Relations on Investment Decisions: An Investigation of Japanese Takeover Bids

Jun‐Koo Kang, Anil Shivdasani and Takeshi Yamada ()

Journal of Finance, 2000, vol. 55, issue 5, 2197-2218

Abstract: We study 154 domestic mergers in Japan during 1977 to 1993. In contrast to U.S. evidence, mergers are viewed favorably by investors of acquiring firms. We document a two‐day acquirer abnormal return of 1.2 percent and a mean cumulative abnormal return of 5.4 percent for the duration of the takeover. Announcement returns display a strong positive association with the strength of acquirer's relationships with banks. The benefits of bank relations appear to be greater for firms with poor investment opportunities and when the banking sector is healthy. We conclude that close ties with informed creditors, such as banks, facilitate investment policies that enhance shareholder wealth.

Date: 2000
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https://doi.org/10.1111/0022-1082.00284

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:55:y:2000:i:5:p:2197-2218

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