International Journal of Business and Economics Volume 9, No. 2 August, 2010

What Factors Drive Takeovers in Australia?

Joshua Porter

Planning and Development Officer, Australia

Harminder Singh

Faculty of Business and Law, Deakin University, Australia

Abstract

We examine the relationships between the wealth changes associated with a takeover announcement to distinguish between three major competing motives—synergy, hubris, and agency. Empirical tests indicate that the synergy motive is the predominant explanation for the majority of takeovers in Australia; however, the evidence is consistent with the simultaneous presence of hubris in value-creating takeovers. The evidence also suggests agency, not hubris, is the primary motivation for the takeovers which result in value destruction.

Keywords：takeovers, synergy, agency.

JEL Classifications：G14, G34.

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