How much is reasonable? The size of termination fees in mergers and acquisitions
We investigate termination fee size in mergers. Although the deal premium does not significantly affect fee size, smaller targets and targets with lower institutional ownership offer larger fees. Low or moderate fees do not eliminate post-announcement competing bids, while large fees do. Fee size is generally positively correlated with deal completion. However, large fees are negatively correlated with the consummation of high-premium deals. Fee size is generally unrelated to announcement-date cumulative abnormal returns. However, returns are significantly lower for deals including fees larger than 5%. Overall, the study provides evidence that low- or moderate-size fees serve as efficient contractual devices, while large fees are less beneficial to shareholders and therefore tend to suggest agency conflicts.
Year of publication: |
2011
|
---|---|
Authors: | Jeon, Jin Q. ; Ligon, James A. |
Published in: |
Journal of Corporate Finance. - Elsevier, ISSN 0929-1199. - Vol. 17.2011, 4, p. 959-981
|
Publisher: |
Elsevier |
Keywords: | Mergers and acquisitions Termination fees Deal premium |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
The role of co-managers in reducing flotation costs : evidence from seasoned equity offerings
Jeon, Jin Q., (2011)
-
How much is reasonable? : the size of termination fees in mergers and acquisitions
Jeon, Jin Q., (2011)
-
How much is reasonable? The size of termination fees in mergers and acquisitions
Jeon, Jin Q., (2011)
- More ...