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A Re-examination of the Market Reaction to Failed Mergers

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  • Davidson, Wallace N, III
  • Dutia, Dipa
  • Cheng, Louis
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    Abstract

    This study examines the revaluation of shares surrounding the cancellation of mergers over the years 1976-85. The results are first categorized according to the party canceling the merger and then by subsequent merger activity. The results are as expected: target firms that become involved in merger activity, subsequent to the cancellation, experience positive cumulative prediction errors. Targets that do not become involved in subsequent merger activity have cumulative prediction errors that return to premerger announcement levels. These results do not vary when bidders or targets cancel the merger. Copyright 1989 by American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 44 (1989)
    Issue (Month): 4 (September)
    Pages: 1077-83

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    Handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:1077-83

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    Cited by:
    1. Jeff Madura & Thanh Ngo, 2012. "Re-examination of industry effects due to withdrawn mergers," Journal of Economics and Finance, Springer, vol. 36(3), pages 613-633, July.
    2. Ulrike Malmendier & Marcus Matthias Opp & Farzad Saidi, 2012. "Cash is King - Revaluation of Targets after Merger Bids," NBER Working Papers 18211, National Bureau of Economic Research, Inc.
    3. Cole, Rebel & Fatemi, Ali & Vu, Joseph, 2006. "Do mergers create or destroy value? Evidence from unsuccessful mergers," MPRA Paper 4717, University Library of Munich, Germany.

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