Mergers and Acquisitions: The Performance of the Acquiring Firm-Empirical Study of Cheverontexaco

Emmanuel Opoku Marfo, Kwame Oduro Amoako, Evans Kelvin Gyau

Abstract


This paper analyzes a merger in the oil industry; in the case of Chevron and Texaco. Oil is assumed to be a homogeneous good which is produced by a small number of firms with different unit costs. Merger formation is endogenously explained as a result of cooperative decisions. It is shown that merger participants are very asymmetric if prior costs of production differences are moderate. If cost differences are large, however, the more efficient firms participate in the mergers to enjoy production efficiency, while the least efficient firms are not attractive partners and, therefore, remain independent in the post-merger market. Moreover, the research tries to investigate Chevron share returns if the merger has achieved its goal of maximizing shareholders wealth.

Keywords


ChevronTexaco; Merger formation; Oil industry

Full Text:

PDF

References


Asim. M., & Goel. R. (2006). Returnto shareholders from mergers. IIBM Management Review, 17(3).

Anderson, W., & McLaughlin, S. (2012) Buybacks versus ordinary dividends: Marginal investor reactions to cash-return announcements. Albany, New Zealand: 16th New Zealand Finance Colloquium, 9-10Feb2012. http://www.nzfc.ac.nz/archives/2012/papers/updated/26.pdf. (Conference Contribution - Paper in published proceedings)

Anderson, W., & Chang, A. (2011) Are profit warnings and suspension notices adequate distress disclosures on the New Zealand stock exchange? International Research Journal of Finance and Economics, (73), 27-45. http://www.eurojournals.com/IRJFE_73_03.pdf. (Journal Article)

Anderson, W. W. (2011). Dealing With Trading Thinness in Event Studies: An Improved Trade-To-Trade Model. Christchurch: 15th New Zealand Finance Colloquium, 10-11 February 2011. (Conference Contribution - Full conference paper)

Anderson, W. W., & Chang, A. (2011). The impact of disclosures of financial distress on the market value of shares of publicly-listed New Zealand firms. Darwin, Australia: 2011 Accounting and Finance Association of Australia and New Zealand (AFAANZ), 3-5 Jul 2011. (Conference Contribution - Paper in published proceedings)

Andrade, Gregor, & Erik Stafford (2004). Investigating the economic role of mergers. Journal of Corporate Finance, 10(1), 1-36.

Arnold, G. (2005). Corporate financial management. Pitman Publishing.

Agrawal, Anup, & Jeffrey F. Jaffe, (2003). Do takeover targets underperform? Evidence from operating and stock returns. Journal of Financial and Quantitative Analysis, 38, 721.746.

Ashkenas, R. N., & Francis, S. C. (2000) Integration managers: Special leaders for special times. Harvard Business Review, Nov–Dec, 108–114.

Cybo-Ottone, A., & Murgia, M. (2000). Mergers and shareholder wealth in European Banking. Journal of Banking & Finance, 24, 831-859.

Datta, S., Iskandar-Datta, M., & Raman, K. (2003, Feb.). Value creation in corporate asset sales: Therole of managerial performance and lender monitoring. Journal of Banking and Finance, 27(2), 351-375.

Elton, D. J., & Gruber, M. J. (1995). Modern portfolio theory and investment analysis (5th ed.). John Wiley & Sons, Inc.

Fuller, K. Netter, J., & Stegemoller, M. (2002, Aug.). What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions. Journal of Finance, 57(4), 1763-1793.

Gaspar, José-Miguel, Massimo Massa, & Pedro Matos, (2005). Shareholder investment horizons and the market for corporate control. Journal of Financial Economics, 76, 135.165.

Gowrisankaran, Gautam, & Thomas J. Holmes (2004). Mergers and the Evolution of Industry Concentration: Results from the Dominant-Firm Model. RAND Journal of Economics, 35(3), 561-582.

Havrylchyk, O. (2004). Consolidation of the Polish banking sector: Consequences for the banking institutions and the public. Economic Systems, 28, 125–140.

Jensen, Michael C., (2004). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323.329.

Jorion, P., Liu, Z., & Shi, C. (2005). Stanford Law School, 2005. Securities Class Action Clearinghouse.

Kaen, F. R. (1995). Corporate finance. Blackwell Business, UK.

Kiymaz, H., & Mukherjee, T. K. (2001). Parameter shifts when measuring wealth effects in cross border mergers. Global Finance Journal, 12, 249–266.

Kruse, T. A. (2002). Asset liquidity and the determinants of asset sales by poorly performing firms. Financial Management, 31(4), 107-129.

Luo, Yuanzhi (2005). Do insiders learn from outsiders? Evidence from mergers and acquisitions. Journal of Finance, 60, 1951.1982.

Louis, Henock (2004). Earnings management and the market performance of acquiring firms. Journal of Financial Economics, 74, 121.148.

Mitchell, M., Pulvino, T. & Stafford, E. (2004). Price pressure around mergers. Journal of Finance, 58, 31-63.

Moeller, S. B., Schlingemann,F. P., & Stulz, R. M. (2004). Firm size and the gains from acquisitions. Journal of Financial Economics, 73, 201-228.

Moeller, S. B., Schlingemann, F. P., & Stulz, R. M. (2005). Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave. Journal of Finance, 60, 757-782.

Otchere, I., & Ip, E. (2006). Intra-industry effects of completed and cancelled cross border acquisitions in Australia: A test of the acquisition probability hypothesis. Pacific-Basin Finance Journal, 14, 209–230

Panayides, Ph., & Gong, X. (2002). The stock market reaction to merger and acquisition announcements in liner shipping. International Journal of Maritime Economics, 4, 55-80.

Rhodes-Kropf, Matthew, David T. Robinson, & Viswanathan, S. (2005). Valuation waves and merger activity: The empirical evidence. Journal of Financial Economics 77, 561.603. (004). Market valuation and merger waves, Journal of Finance, 59, 2685.2718. 31

Rosen, Richard J., (2004). Merger momentum and investor sentiment: The stock market reaction to merger announcements. Journal of Business forthcoming.

Scholtens, B., & De Wit, R. (2004). Announcement effects of bank mergers in Europe and the US. Research in International Business and Finance, 18, 217–228.

Weston, J. F. (2002). The ExxonMobil merger: An archetype. The Anderson school of UCLA.

Yusce Ayse (2003). Creating wealth through mergers. Journal of Academy of Business Economics.




DOI: http://dx.doi.org/10.3968%2Fj.css.1923669720130905.2839

Refbacks

  • There are currently no refbacks.


Reminder

If you have already registered in Journal A and plan to submit article(s) to Journal B, please click the CATEGORIES, or JOURNALS A-Z on the right side of the "HOME".


We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases: caooc@hotmail.com; css@cscanada.net; css@cscanada.org

Copyright © Canadian Academy of Oriental and Occidental Culture

Address: 730, 77e AV, Laval, Quebec, H7V 4A8, Canada

Telephone: 1-514-558 6138

Http://www.cscanada.net Http://www.cscanada.org

E-mail:css@cscanada.net, css@cscanada.org