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Motives in the Acquisitions of NASDAQ Targets during the Aftermath of the 1987 Crash

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  • Vijay Gondhalekar
  • Yatin Bhagwat
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    Abstract

    After the crash of 1987, the Nasdaq composite index stayed below the precrash level for nearly two years. Takeover activity surged in this after-crash period. We compare the motives in the acquisitions of Nasdaq targets during the after-crash period with those in the ten-year period before the crash. We find that the announcement period return to acquirers and the proportion of acquirers with positive gains declines in the after-crash period. For both the periods, agency is the motive for takeovers that have negative total gains (acquirer + target), but synergy and hubris are comotives for takeovers that have positive total gains. The proportion of takeovers in which the managers of acquirers act against the interest of the shareholders increases after the crash. Copyright 2003 by the Eastern Finance Association.

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    Bibliographic Info

    Article provided by Eastern Finance Association in its journal The Financial Review.

    Volume (Year): 38 (2003)
    Issue (Month): 4 (November)
    Pages: 553-569

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    Handle: RePEc:bla:finrev:v:38:y:2003:i:4:p:553-569

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    Web page: http://www.easternfinance.org/
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    Cited by:
    1. Taher Hamza, 2011. "Determinants of short-term value creation for the bidder: evidence from France," Journal of Management and Governance, Springer, vol. 15(2), pages 157-186, May.
    2. Joshua Porter & Harminder Singh, 2010. "What Factors Drive Takeovers in Australia?," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 9(2), pages 87-103, August.

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