Factors Affecting the Market for Corporate Control: The Role of Excess Cash, Diversification, and Predation during Mergers and Acquisitions

Rahul Dhumale

Chapter 6 in Excess Cash Flow, 2003, pp 151-181 from Palgrave Macmillan

Abstract: Abstract A a microeconomic level, the information value of a firm’s financial structure is relevant for its behaviour in takeovers and acquisitions; however, this information can be misused at great cost to the market. Consequently, takeovers and mergers could exact negative externalities on the market through short-termism, greater concentration of industry, and agency costs. This chapter examines the signalling effects of earnings retention and diversification on returns during acquisitive activities and considers the benefits and disadvantages of a more active market for corporate control within India at a macroeconomic level.

Keywords: Corporate Governance; Capital Market; Abnormal Return; Agency Cost; Total Return (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-50951-1_6

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DOI: 10.1057/9780230509511_6

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