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Factors Affecting the Market for Corporate Control: The Role of Excess Cash, Diversification, and Predation during Mergers and Acquisitions

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Abstract

A a microeconomic level, the information value of a firm’s financial structure is relevant for its behaviour in takeovers and acquisitions; however, this information can be misused at great cost to the market. Consequently, takeovers and mergers could exact negative externalities on the market through short-termism, greater concentration of industry, and agency costs. This chapter examines the signalling effects of earnings retention and diversification on returns during acquisitive activities and considers the benefits and disadvantages of a more active market for corporate control within India at a macroeconomic level.

Keywords

Corporate Governance Capital Market Abnormal Return Agency Cost Total Return 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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© Rahul Dhumale 2003

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