Diversification to mitigate expropriation in the tobacco industry

• 成果类型: Article
• 署名作者: Beneish, Messod D.; Jansen, Ivo Ph.; Lewis, Melissa F.; Stuart, Nathan V.
• 署名单位: Indiana University System; Indiana University Bloomington; IU Kelley School of Business; Rutgers University System; Rutgers University New Brunswick; Rutgers University Camden; Utah System of Higher Education; University of Utah; State University System of Florida; University of South Florida
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.08.001
• 发表日期: 2008
• 页码: 136-157
• 关键词: TOBACCO; acquisitions; diversification; expropriation costs

摘要

While it is well established that diversifying acquisitions by large, cash-rich firms destroy shareholder wealth, we document positive abnormal returns to such acquisitions in the tobacco industry. We show that these abnormal returns are associated with proxies for lower expected expropriation costs. Specifically, we show that wealth creation increases in the degree of domestic geographic expansion afforded by the acquisition (increasing tobacco firms' influence in more political districts) and in the liquidity of tobacco firms' assets (converting cash to harder-to-expropriate operating assets). We also show that the threat of expropriation constrains payments to shareholders before expropriation becomes certain in 1998. (C) 2008 Elsevier B.V. All rights reserved.