Abstract
The academic literature indicates that “glamour” influences the investor’s behaviour. This article analyses the performance and value creation of the glamorous operations of mergers and acquisitions (M&A) in the telecommunications sector, trying to understand if these operations are conducive to stockholder wealth maximization. To conduct this analysis, the telecommunications M&A that occurred in the convulsed period of the internet bubble were counted as samples (1995–2010). The research concludes that glamour tends to be opposite to value creation in the long run: the glamour firms show significant value destruction and worse performance than non-glamour firms. Certain acquirers’ characteristics, such as size, are determinant in the glamour behaviour. This paper combats the shortage of research of a quantitative sectoral nature on telecommunications M&As, when leading international companies like Vodafone, Cable and Wireless, France Telecom or Telecom Italia are very active in this kind of operations.
Highlights
Glamour acquirers are those firms that are highly valued in the stock markets as a result of their prior stock market performance (Sudarsanam and Mahate, 2003)
We have examined the mergers and acquisitions (M&A) performance in the telecommunications sector and the role of the glamour in these types of operations
The research applied a robust method (CTAR) to understand the glamour firms’ behaviour versus that of value companies and to study the factors influencing the success of these operations
Summary
Glamour acquirers are those firms that are highly valued in the stock markets as a result of their prior stock market performance (Sudarsanam and Mahate, 2003). Their stocks receive premium ratings in the form of market value to book value ratio, or reversely a low book-to-market ratio (Hashem and Su, 2015). Firms with high book-to-market ratio ratings are undervalued, but may have the potential for subsequent value gains In their landmark seminal researches, Fama and French (1992, 1996) argue that the book-to-market ratio is a risk proxy. Perspect., 2020, 2(3): 20; doi:10.35995/jbafp2030020 page 2
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