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Do shareholders of acquiring firms gain from acquisitions?

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  • Sara B. Moeller
  • Frederik P. Schlingemann
  • Rene M. Stulz

Abstract

We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained $8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9523.

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Date of creation: Mar 2003
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Handle: RePEc:nbr:nberwo:9523

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Citations

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Cited by:
  1. Jory, Surendranath R. & Madura, Jeff & Ngo, Thanh N., 2012. "Deal structure decision in the global market for divested assets," International Review of Financial Analysis, Elsevier, Elsevier, vol. 24(C), pages 104-116.
  2. MING DONG & David Hirshleifer & SCOTT RICHARSON & Siew Hong Teoh, 2004. "Does Investor Misvaluation Drive the Takeover Market?," Finance, EconWPA 0412002, EconWPA.
  3. Sanjai Bhagat & Ming Dong & David A. Hirshleifer & Robert B. Noah, 2004. "Do Tender Offers Create Value? New Methods and Evidence," Finance, EconWPA 0412011, EconWPA.
  4. Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007. "Mergers and acquisitions in the pharmaceutical and biotech industries," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
  5. Gregory, Alan & McCorriston, Steve, 2005. "Foreign acquisitions by UK limited companies: short- and long-run performance," Journal of Empirical Finance, Elsevier, Elsevier, vol. 12(1), pages 99-125, January.
  6. Nababan, Tongam Sihol & Nababan, Sere Eva & Tampubolon, Bantu, 2005. "Analysis of Relationship Between Market Reactions and Long Term Performance on Acquisitions," MPRA Paper 49110, University Library of Munich, Germany.
  7. Gary Gorton & Matthias Kahl & Richard Rosen, 2005. "Eat or Be Eaten: A Theory of Mergers and Merger Waves," NBER Working Papers 11364, National Bureau of Economic Research, Inc.
  8. Robert L Conn & Andy Cosh & Paul M Guest & Alan Hughes, 2003. "The Impact on U.K. Acquirers of Domestic, Cross-border, Public and Private Acquisitions," ESRC Centre for Business Research - Working Papers, ESRC Centre for Business Research wp276, ESRC Centre for Business Research.
  9. Song, Moon H. & Walkling, Ralph A., 2005. "Anticipation, Acquisitions and Bidder Returns," Working Paper Series, Ohio State University, Charles A. Dice Center for Research in Financial Economics 2005-11, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  10. Dutta, Shantanu & Jog, Vijay, 2009. "The long-term performance of acquiring firms: A re-examination of an anomaly," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(8), pages 1400-1412, August.
  11. Lublóy, Ágnes & Tóth, Eszter, 2010. "A közép-kelet-európai bankfúziók eredményessége
    [The success of the bank mergers in Central Eastern Europe]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 37-58.

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