Anchoring in Mergers and Acquisitions: Does the Regulatory Environment Matter?

Ranganathan, Kavitha and Singh, Poonam (2018) Anchoring in Mergers and Acquisitions: Does the Regulatory Environment Matter? Journal of Accounting, Auditing & Finance. pp. 1-30.

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Abstract

We examine the 52-week anchoring effect in the Indian takeover market that has a unique regulatory design. The Indian takeover regulation mandates the minimum offer price to be function of the target’s 26-week or 60-day high price. We show that the 52-week anchoring effect is robust even in the face of other regulatory anchors that differ from the widely cited 52-week high price. The anchoring effect dominates when the offer price exceeds the 52-week high price. Regulatory intervention in 2011 that shifts the floor price to a recent market price, such as the 60-day high price, does not attenuate the 52-week anchoring effect. We infer that acquirers are willing to pay a higher premium while anchoring to the 52-week high price, even when the regulatory focus is on lower reference prices. Besides, regulatory anchors also serve as additional focal points, demonstrated by the significance of the 26-week high price during its own period of regulation (2002-2011)

Item Type:	Article
Uncontrolled Keywords:	52-Week High Price; Mergers and Acquisitions; Reference Point; Anchoring and Adjustment; Regulation
Subjects:	Finance
Divisions:	Finance and Strategy
Depositing User:	Mr. Muralidhara D
Date Deposited:	19 Dec 2018 06:31
Last Modified:	14 Feb 2019 09:26
URI:	http://tapmi.informaticsglobal.com/id/eprint/556

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