The strategy-shareholder value relationship: testing temporal stability across market cycles

Article Abstract:

The best technique for protecting stockholder value against economic downturns in business cycles is to diversify investments in a related manner so that they are similar. Investment strategy should specifically consider its market environment when being evaluated, and it is useful to consider the strategies of the companies concerned when examining the relationship of business cycles and the stationarity of the market model coefficients. Companies diversifying by emphasizing common core technology demonstrate a lower level of systematic risk, regardless of the market environment. Diversified investments that are similar earn higher risk-adjusted returns than dissimilar investments during market downturns.

Methods, Economic aspects, Stocks, Business cycles

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Merger strategies and stockholder value

Article Abstract:

Acquisition research indicates a tie between shareholder gains and how merging companies are related. This idea is tested by grouping mergers into four relatedness categories, and by employing stockholder value measures as developed in the capital markets literature. Stock returns from 439 acquiring companies in 1,031 large mergers are looked at, as are stock returns from 340 big, acquired companies. Findings indicate that mergers result in permanent gains in shareholder value for stockholders in both acquired and acquiring firms. The notion that some product and market relatedness is superior to none is not supported.

Usage, Planning

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Corporate mergers, stockholder diversification, and changes in systematic risk

Article Abstract:

One hundred twenty large mergers were examined to determine the connection between the relatedness and systematic risk of consolidating firms. The analysis controlled for systematic risk for target firms, monitored risk over monthly and daily time periods, and considered the influence of leverage. Research results reveal clear support for the hypothesis that related mergers will lower the systematic risk of bidding companies. Research results reveal less support for the hypothesis that unrelated mergers will not alter the systematic risk of bidding companies.

Management, Risk (Economics), Strategic planning (Business), Diversification in industry, Industrial diversification

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