IDEAS home Printed from https://ideas.repec.org/a/eee/telpol/v42y2018i5p395-408.html
   My bibliography  Save this article

Do telecom carrier takeovers create value? Longitudinal analysis of U.S. telecom carrier takeovers from 1996 to 2005

Author

Listed:
  • Ryu, Min Ho
  • Yang, Shuying
  • Kim, Seongcheol

Abstract

Takeovers by telecommunications carriers have surged during between 1996 and 2005, stimulated by the Telecommunications Act of 1996. In this study, we hypothesize and test the short-term and long-term performance of telecommunications carrier mergers and acquisitions (M&As) between 1996 and 2005 according to three main categories (strategic types, bidder characteristics, and payment methods). For short-term performance, this study investigates abnormal market returns of bidding firms after M&A announcements and our study shows that telecommunications carrier M&A announcements do result in a significant increase in shareholder wealth in the short run. However, from a long-term perspective, which has been investigated in terms of the survival rate and the operating performance after M&As, the telcos experience a statistically significant decrease of up to 10%. The results also show that though strategic type, bidder characteristics, and payment method play an important role in the value creation of M&As in the short term, only the bidder size matters in the success of M&As over a long period of time.

Suggested Citation

  • Ryu, Min Ho & Yang, Shuying & Kim, Seongcheol, 2018. "Do telecom carrier takeovers create value? Longitudinal analysis of U.S. telecom carrier takeovers from 1996 to 2005," Telecommunications Policy, Elsevier, vol. 42(5), pages 395-408.
    • Handle: RePEc:eee:telpol:v:42:y:2018:i:5:p:395-408
    DOI: 10.1016/j.telpol.2018.02.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0308596117304585
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.telpol.2018.02.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Juliet D'souza & William L. Megginson, 1999. "The Financial and Operating Performance of Privatized Firms during the 1990s," Journal of Finance, American Finance Association, vol. 54(4), pages 1397-1438, August.
    2. D'Souza, Juliet & Megginson, William & Nash, Robert, 2007. "The effects of changes in corporate governance and restructurings on operating performance: Evidence from privatizations," Global Finance Journal, Elsevier, vol. 18(2), pages 157-184.
    3. Trillas, Francesc, 0. "Mergers, acquisitions and control of telecommunications firms in Europe," Telecommunications Policy, Elsevier, vol. 26(5-6), pages 269-286, June.
    4. Hsiang-Hsi Liu & Tser-Yieth Chen & Lin-Yen Pai, 2007. "The Influence of Merger and Acquisition Activities on Corporate Performance in the Taiwanese Telecommunications Industry," The Service Industries Journal, Taylor & Francis Journals, vol. 27(8), pages 1041-1051, December.
    5. Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
    6. David R. King & Dan R. Dalton & Catherine M. Daily & Jeffrey G. Covin, 2004. "Meta‐analyses of post‐acquisition performance: indications of unidentified moderators," Strategic Management Journal, Wiley Blackwell, vol. 25(2), pages 187-200, February.
    7. Majumdar, Sumit K. & Yaylacicegi, Ulku & Moussawi, Rabih, 2012. "Mergers and synergy: Lessons from contemporary telecommunications history," Telecommunications Policy, Elsevier, vol. 36(2), pages 140-154.
    8. Bum Soo Chon & Junho Choi & George Barnett & James Danowski & Sung-Hee Joo, 2003. "A Structural Analysis of Media Convergence: Cross-Industry Mergers and Acquisitions in the Information Industries," Journal of Media Economics, Taylor & Francis Journals, vol. 16(3), pages 141-157.
    9. Kenneth R. Ahern & Jarrad Harford, 2014. "The Importance of Industry Links in Merger Waves," Journal of Finance, American Finance Association, vol. 69(2), pages 527-576, April.
    10. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    11. Huang, Guihai & Song, Frank M., 2005. "The financial and operating performance of China's newly listed H-firms," Pacific-Basin Finance Journal, Elsevier, vol. 13(1), pages 53-80, January.
    12. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kanungo, Rama Prasad, 2021. "Uncertainty of M&As under asymmetric estimation," Journal of Business Research, Elsevier, vol. 122(C), pages 774-793.
    2. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    3. Wang, Ye & Yin, Sirui, 2018. "CEO educational background and acquisition targets selection," Journal of Corporate Finance, Elsevier, vol. 52(C), pages 238-259.
    4. Chondrakis, George, 2016. "Unique synergies in technology acquisitions," Research Policy, Elsevier, vol. 45(9), pages 1873-1889.
    5. Cui, Huijie & Chi-Moon Leung, Sidney, 2020. "The long-run performance of acquiring firms in mergers and acquisitions: Does managerial ability matter?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    6. Humphery-Jenner, Mark & Powell, Ronan, 2014. "Firm size, sovereign governance, and value creation: Evidence from the acquirer size effect," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 57-77.
    7. Yanga, Shuying & Kim, Seongcheol, 2017. "Do Cross-border M&As by Chinese Media and Entertainment Firms Create Value? Evidence from US-targeted and Korea-targeted Deals," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168549, International Telecommunications Society (ITS).
    8. Dong, Yizhe & Li, Chang & Li, Haoyu, 2021. "Customer concentration and M&A performance," Journal of Corporate Finance, Elsevier, vol. 69(C).
    9. Tang, Haodan & Fang, Senhui & Jiang, Dianchun, 2022. "The market value effect of digital mergers and acquisitions: Evidence from China," Economic Modelling, Elsevier, vol. 116(C).
    10. Duchin, Ran & Schmidt, Breno, 2013. "Riding the merger wave: Uncertainty, reduced monitoring, and bad acquisitions," Journal of Financial Economics, Elsevier, vol. 107(1), pages 69-88.
    11. David Benson & Rosemarie H. Ziedonis, 2009. "Corporate Venture Capital as a Window on New Technologies: Implications for the Performance of Corporate Investors When Acquiring Startups," Organization Science, INFORMS, vol. 20(2), pages 329-351, April.
    12. Saad Alnahedh & Bader Alhashel, 2021. "Political ideology in M&A," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1711-1746, October.
    13. Bhabra, Harjeet S. & Huang, Jiayin, 2013. "An empirical investigation of mergers and acquisitions by Chinese listed companies, 1997–2007," Journal of Multinational Financial Management, Elsevier, vol. 23(3), pages 186-207.
    14. Bertrand, Olivier & Betschinger, Marie-Ann, 2012. "Performance of domestic and cross-border acquisitions: Empirical evidence from Russian acquirers," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 413-437.
    15. Lee, Hyeongjik & Seol, Seong-ho & Kweon, Soo Cheon, 2012. "An event study of the first telecommunications spectrum auction in Korea and "the winner's curse"," 23rd European Regional ITS Conference, Vienna 2012 60394, International Telecommunications Society (ITS).
    16. Basnet, Anup & Davis, Frederick & Walker, Thomas & Zhao, Kun, 2021. "The effect of securities class action lawsuits on mergers and acquisitions," Global Finance Journal, Elsevier, vol. 48(C).
    17. Stienstra, Miranda, 2020. "The determinants and performance implications of alliance partner acquisition," Other publications TiSEM 7fdee0c2-d4d2-4f5b-95e3-2, Tilburg University, School of Economics and Management.
    18. Anastasia Stepanova & Vladislav Savelyev & Malika Shaikhutdinova, 2018. "The Anchoring Effect in Mergers and Acquisitions: Evidence from an Emerging Market," HSE Working papers WP BRP 63/FE/2018, National Research University Higher School of Economics.
    19. Paul A. Gompers & Yuhai Xuan, 2012. "The Role of Venture Capitalists in the Acquisition of Private Companies," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 28, Edward Elgar Publishing.
    20. Mufaddal Baxamusa & Sudip Datta & Anand Jha, 2021. "Does policy uncertainty increase relational risks? Evidence from strategic alliances," Financial Management, Financial Management Association International, vol. 50(3), pages 645-689, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:telpol:v:42:y:2018:i:5:p:395-408. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/30471/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.