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Erschienen in:
Introduction to Financial Econometrics and Statistics Kapitel lesen Erstes Kapitel lesen

2015 | OriginalPaper | Buchkapitel

21. Effect of Merger on the Credit Rating and Performance of Taiwan Security Firms

verfasst von : Suresh Srivastava, Ken Hung

Erschienen in: Handbook of Financial Econometrics and Statistics

Verlag: Springer New York

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Abstract

The effect of a merger on credit rating is investigated by testing the significance of change in a firm’s rank based on comprehensive performance score and synergistic gains. We extract principle component factors from a set of financial ratios. Percentage of variability explained and factor loadings are adjusted to get a modified average weight for each financial ratio. This weight is multiplied by the standardized Z value of the variable, and summed a set of variables to get a firm’s performance score. Performance scores are used to rank the firm. Statistical significance of difference in pre- and post-merger rank is tested using the Wilcoxon sign rank (double end).
We studied the merger of financial firms after the enactment of Taiwan’s Merger Law for Financial Institution in November 2000 to examine synergies produced by merger. Synergistic gains affect corporate credit ratings. After taking into account the large Taiwan market decline from 1999 to 2000, test results show there is no significant operating, market, and financial synergy produced by the merger firms. Most likely explanations for the insignificant rank changes are short observation period and the lack of an adequate sample in this investigation.
We identify and define variables for merger synergy analysis followed by principal component factor analysis, variability percentage adjustment, and performance score calculation. Finally, Wilcoxon sign rank test is used for hypothesis testing. Reader is well referred to the appendix for details.

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Vorheriges Kapitel Composite Goodness-of-Fit Tests for Left-Truncated Loss Samples
Nächstes Kapitel On-/Off-the-Run Yield Spread Puzzle: Evidence from Chinese Treasury Markets
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Fußnoten
1
World leading credit rating agencies are Moody’s Investors Service, Standard & Poor’s Corp, Fitch Investors Service, Duff & Phelps, Japan Bond Research Institution, Nippon Investors Service, Japan Credit Rating Agency, China Credit Rating Agency, and Taiwan New Economy Newspaper (Weston and Mansinghka 1971; Williamson 1981).
 
2
Theory of merger is discussed in Brigham and Daves (2007), Copeland and Weston (1979), Gardner (1996), and Rhodes (1983). Tax incentive is discussed in Weston and Chung (1983).
 
3
3-month and 6-month analyses were performed but are omitted as these did not add additional foresight.
 
4
References for Statistical and Econometric issues are Johnson and Wichern (2007) and Woolridge (2009).
 
Literatur
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Brigham, E. F., & Daves, P. (2007). Intermediate financial management. Mason: Thomson South West.
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Fluck, Z., & Lynch, A. W. (1999). Why do firms merge and then divest? A theory of financial synergy. Journal of Business, 72, 319–346.CrossRef
Gardner, D. C. (1996). Introduction to mergers and acquisitions. London: Pitman Publishing.
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Weston, J. F., & Chung, K. S. (1983). Do merger make money? A reach summary. Mergers & Acquisitions, 18, 40–48.
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Metadaten
Titel
Effect of Merger on the Credit Rating and Performance of Taiwan Security Firms
verfasst von
Suresh Srivastava
Ken Hung
Copyright-Jahr
2015
Verlag
Springer New York
Buch
Handbook of Financial Econometrics and Statistics

Print ISBN: 978-1-4614-7749-5

Electronic ISBN: 978-1-4614-7750-1

Copyright-Jahr: 2015

DOI
https://doi.org/10.1007/978-1-4614-7750-1_21