The Journal of Finance

The Geography of Block Acquisitions

Published: 11/11/2008   |   DOI: 10.1111/j.1540-6261.2008.01414.x

JUN‐KOO KANG, JIN‐MO KIM

Using a large sample of partial block acquisitions, we examine the importance of geographic proximity in corporate governance and target returns. We find that block acquirers have a strong preference for geographically proximate targets and acquirers that purchase shares in such targets are more likely to engage in post‐acquisition target governance activities than are remote block acquirers. Moreover, the targets of these acquirers realize higher announcement returns and better post‐acquisition operating performance than do targets of other types of acquirers, particularly when they face greater information asymmetries.

The Effect of Bank Relations on Investment Decisions: An Investigation of Japanese Takeover Bids

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00284

Jun‐Koo Kang, Anil Shivdasani, Takeshi Yamada

We study 154 domestic mergers in Japan during 1977 to 1993. In contrast to U.S. evidence, mergers are viewed favorably by investors of acquiring firms. We document a two‐day acquirer abnormal return of 1.2 percent and a mean cumulative abnormal return of 5.4 percent for the duration of the takeover. Announcement returns display a strong positive association with the strength of acquirer's relationships with banks. The benefits of bank relations appear to be greater for firms with poor investment opportunities and when the banking sector is healthy. We conclude that close ties with informed creditors, such as banks, facilitate investment policies that enhance shareholder wealth.

Business Groups and Tunneling: Evidence from Private Securities Offerings by Korean Chaebols

Published: 09/19/2006   |   DOI: 10.1111/j.1540-6261.2006.01062.x

JAE‐SEUNG BAEK, JUN‐KOO KANG, INMOO LEE

We examine whether equity‐linked private securities offerings are used as a mechanism for tunneling among firms that belong to a Korean chaebol. We find that chaebol issuers involved in intragroup deals set the offering prices to benefit their controlling shareholders. We also find that chaebol issuers (member acquirers) realize an 8.8% (5.8%) higher (lower) announcement return than do other types of issuers (acquirers) if they sell private securities at a premium to other member firms, and if the controlling shareholders receive positive net gains from equity ownership in issuers and acquirers. These results are consistent with tunneling within business groups.

Tunneling or Value Added? Evidence from Mergers by Korean Business Groups

Published: 12/17/2002   |   DOI: 10.1111/1540-6261.00510

Kee‐Hong Bae, Jun‐Koo Kang, Jin‐Mo Kim

We examine whether firms belonging to Korean business groups (chaebols) benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms (tunneling). We find that when a chaebol‐affiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebol‐affiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis.