IDEAS home Printed from https://ideas.repec.org/p/ecl/ohidic/2020-18.html
   My bibliography  Save this paper

Do Acquirer Announcement Returns Reflect Value Creation?

Author

Listed:
  • Ben-David, Itzhak

    (Ohio State U)

  • Bhattarcharya, Utpal

    (Hong Kong U of Science and Technology)

  • Jacobsen, Stacey

    (Southern Methodist U)

Abstract

Stock returns around acquisition announcements are widely viewed as being reflective of the net present value created by these transactions. As such, announcement returns should correlate with acquisition outcomes. Using a new measure of realized transaction-level acquisition failure, as well as acquirer firm-level performance, we show that while these outcomes can be predicted based on observable deal and firm characteristics, they are largely uncorrelated with announcement returns. Our results cast doubt on the usefulness of announcement returns as a measure of the value created in acquisitions and call for caution in other contexts.

Suggested Citation

  • Ben-David, Itzhak & Bhattarcharya, Utpal & Jacobsen, Stacey, 2020. "Do Acquirer Announcement Returns Reflect Value Creation?," Working Paper Series 2020-18, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2020-18
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3714832_code1542588.pdf?abstractid=3664087&mirid=1
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gokkaya, Sinan & Liu, Xi & Stulz, René M., 2023. "Do firms with specialized M&A staff make better acquisitions?," Journal of Financial Economics, Elsevier, vol. 147(1), pages 75-105.
    2. Ding, Haoyuan & Hu, Yichuan & Li, Chang & Lin, Shu, 2021. "CEO country-specific experience and cross-border mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 69(C).
    3. Dong, Yizhe & Li, Chang & Li, Haoyu, 2021. "Customer concentration and M&A performance," Journal of Corporate Finance, Elsevier, vol. 69(C).
    4. Najlaa Kallousa & Youngki Jang & Boochun Jung & Hussein Warsame, 2023. "Labor unions and post‐acquisition integration capability: Evidence from goodwill impairment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(3-4), pages 764-794, March.
    5. Dissanaike, Gishan & Drobetz, Wolfgang & Momtaz, Paul P. & Rocholl, Jörg, 2021. "The Economics of Law Enforcement: Quasi-Experimental Evidence from Corporate Takeover Law," Journal of Corporate Finance, Elsevier, vol. 67(C).
    6. Arindam Das, 2021. "Post-Acquisition Performance of Emerging Market Firms: A Multi-Dimensional Analysis of Acquisitions in India," JRFM, MDPI, vol. 14(12), pages 1-18, November.

    More about this item

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:ohidic:2020-18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cdohsus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.