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M&A Activity, Divestitures and Initial Public Offerings in the Fashion Industry

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Steffen Meinshausen

This thesis analyzes four individual corporate finance-related research objectives on the fashion and leather accessories industry. The first two studies investigate the share price reactions of strategic bidder M&A transactions and their key drivers. The third study analyzes the implications of a missed disposal opportunity in the luxury fashion segment. Finally, the fourth study illustrates the long-term performance and changes in systematic risk exposure of initial public offerings in the fashion industry. The thesis contains a variety of empirical findings that are novel to the existing literary base of corporate finance research. It shows the various drivers of consolidation in a highly-dynamic and heterogeneous industry segment over the course of the last two decades.

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3 OPERATING PERFORMANCE CHANGES FOLLOWING FASHION M&A ACTIVITY

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29 3 OPERATING PERFORMANCE CHANGES FOLLOWING FASHION M&A ACTIVITY 3.1 INTRODUCTION A substantial part of the empirical research on M&A success focuses on short- term stock price reactions following transaction announcements. While most of these event studies find significantly positive abnormal returns to target share- holders, bidder stockholders gain abnormal returns that range very close around zero. Event studies that also calculate the value implications for combined enti- ties mostly find small positive abnormal returns and therefore conclude that M&A activity, on average, does create value for the parties involved. A smaller fraction of M&A research analyzes operating performance changes following corporate mergers based on accounting data. In many of such studies, acquiring firms significantly underperform peer group companies in the years after the transaction. This observation represents a clear contradiction to the average results of capital market-oriented event studies. It is therefore of great interest to determine the reasons and drivers of positive stock price reac- tions and eroding operating performance following corporate mergers. To compare these two success indicators it is appropriate to control for in- dustry specifics. The fashion and leather accessories industry has seen a tre- mendous degree of consolidation over the course of the previous decades. There are some unique characteristics that make an independent analysis of this parti- cular business segment worthwhile. First, due to their strong exposure to mostly two seasonal collections’ appreciation by their customers and the resulting very short product life cycles, especially small fashion companies face...

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