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Detail
Journal Article
Mergers and Acquisitions in the Telecommunications Industry:Myths and Reality
- Authors
- Myeong-Cheol Park, Dong-Hoon Yang, Chan Gi Nam, Young-Wook Ha
- Issue Date
- 2002-02
- Citation
- ETRI Journal, v.24, no.1, pp.56-64
- ISSN
- 1225-6463
- Publisher
- 한국전자통신연구원 (ETRI)
- Language
- English
- Type
- Journal Article
- Abstract
- This paper investigates how market participants react to mergers and acquisitions (M&As) involving telecommunications companies. The empirical evidence suggests that such activities convey bad news to the market. This is consistent with the synergy trap hypothesis and extant empirical findings of value-reducing diversification strategies in recent literature. The evidence also indicates that a cross-border, rather than a domestic M&A deal, is the main driver of the negative market reaction. Further, our evidence of negative impacts on the bidder's business after an M&A reinforces our main finding that market participants, on average, perceive M&A activities to be detrimental to shareholder value. This suggests that value creation or synergy through an M&A deal is not warranted even through it can generate an increase in size of the firm.
- KSP Keywords
- Empirical Evidence, Market participants, Mergers and acquisitions, Negative impact, bad news, cross-border, diversification strategies, telecommunications industry, value creation