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Is the event study methodology useful for merger analysis? A comparison of stock market and accounting data

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  • Duso, Tomaso
  • Gugler, Klaus
  • Yurtoglu, Burcin

Abstract

This paper presents empirical evidence about the ability of event studies to capture mergers' ex-post profitability as measured by accounting data. We use a sample of large horizontal concentrations during the period 1990-2002 involving 482 firms either as merging firms or competitors, and contrast a measure of the mergers' profitability based on stock market event studies with one based on balance sheet profit data. We show that using a long window around the announcement date (25 or 50 days before the event) increases the ability to capture the ex-post merger effect: the pairwise correlation coefficient is positive and highly significant.

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  • Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin, 2010. "Is the event study methodology useful for merger analysis? A comparison of stock market and accounting data," International Review of Law and Economics, Elsevier, vol. 30(2), pages 186-192, June.
  • Handle: RePEc:eee:irlaec:v:30:y:2010:i:2:p:186-192
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    More about this item

    Keywords

    Mergers Merger control Event studies Ex-post evaluation;

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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