This study investigates whether the likelihood of deal success/failure in merger transactions is influenced by the underlying characteristics which tend to affect acquirers’ shareholder returns. These characteristics include the method of payment (cash versus stock), target status (listed versus non-listed targets), diversification (domestic versus cross-border and industry-wide deals), and acquirers’ prior bidding experience. We also investigate whether announced deals reflect an expectation about the likelihood of deal completion. The findings from event study confirm that market reaction is indifferent to whether the announced deals are likely to be successfully completed or not, consistent with the efficient markets hypothesis. However, the results from probit regressions confirm that the aforementioned deal characteristics, as well as certain firm and country level factors, influence the likelihood of whether previously announced deals are subsequently completed or cancelled.
- Mergers and Acquisitions
- Event Study
- Abnormal Returns
- Probit regressions
Tanna, S., Yousef, I., & Nnadi, M. (Accepted/In press). Probability of Mergers and Acquisitions Deal Failure. Journal of Financial Economic Policy, (In-press), (In-press). https://doi.org/10.1108/JFEP-09-2019-0182