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Journal of Finance Vol. 55 No. 5 2000

The Effect of Bank Relations on Investment Decisions: An Investigation of Japanese Takeover Bids

Jun-Koo Kang1,2,3; Anil Shivdasani1,4,3; Takeshi Yamada1,5,3

1 Kanazawa University · 2 Michigan State University · 3 University of Hong Kong · 4 University of North Carolina at Chapel Hill · 5 Hong Kong University of Science and Technology

Abstract

We study 154 domestic mergers in Japan during 1977 to 1993. In contrast to U.S. evidence, mergers are viewed favorably by investors of acquiring firms. We document a two‐day acquirer abnormal return of 1.2 percent and a mean cumulative abnormal return of 5.4 percent for the duration of the takeover. Announcement returns display a strong positive association with the strength of acquirer's relationships with banks. The benefits of bank relations appear to be greater for firms with poor investment opportunities and when the banking sector is healthy. We conclude that close ties with informed creditors, such as banks, facilitate investment policies that enhance shareholder wealth.

DOI
10.1111/0022-1082.00284
Volume
55
Issue
5
Pages
2197-2218
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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