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Social Connections, Reference Point and Acquisition Premium

Guo, M.; Li, X.; Seeger, N.C.; Vagenas-Nanos, V.

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Authors

X. Li

N.C. Seeger

V. Vagenas-Nanos



Abstract

This paper examines the impact of acquirer-target social connections along with the target 52-week high (Baker et al., 2012) on acquisition premiums. We show that acquisition premium is more sensitive to first-degree connection than the reference point, suggesting that information is the main driving force for determining acquisition premiums. The findings also indicate that connected directors are more likely to favour firms where they hold higher positions and negotiate favourable premiums. Acquirers pay lower premiums when target directors are retained in the new entity. Connected acquirers are also more likely to finance their deals with equity. Overall, this paper provides support to the information flow hypothesis that acquirers with social connections have better access to target information and enhanced bargaining power in negotiations.

Citation

Guo, M., Li, X., Seeger, N., & Vagenas-Nanos, V. (2019). Social Connections, Reference Point and Acquisition Premium. The British Accounting Review, 51(1), 46-71. https://doi.org/10.1016/j.bar.2018.07.001

Journal Article Type Article
Acceptance Date Jul 20, 2018
Online Publication Date Jul 25, 2018
Publication Date Jan 31, 2019
Deposit Date Jul 7, 2018
Publicly Available Date Mar 29, 2024
Journal British Accounting Review
Print ISSN 0890-8389
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 51
Issue 1
Pages 46-71
DOI https://doi.org/10.1016/j.bar.2018.07.001
Public URL https://durham-repository.worktribe.com/output/1326736

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