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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

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.

Suggested Citation

  • Davidson, Wallace N, III & Dutia, Dipa & Cheng, Louis, 1989. " A Re-examination of the Market Reaction to Failed Mergers," Journal of Finance, American Finance Association, vol. 44(4), pages 1077-1083, September.
  • Handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:1077-83
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    Cited by:

    1. 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.
    2. Malmendier, Ulrike & Opp, Marcus M. & Saidi, Farzad, 2016. "Target revaluation after failed takeover attempts: Cash versus stock," Journal of Financial Economics, Elsevier, vol. 119(1), pages 92-106.
    3. Abhirup Chakrabarti & Will Mitchell, 2016. "The role of geographic distance in completing related acquisitions: Evidence from U.S. chemical manufacturers," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 673-694, April.
    4. Jacobsen, Stacey, 2014. "The death of the deal: Are withdrawn acquisition deals informative of CEO quality?," Journal of Financial Economics, Elsevier, vol. 114(1), pages 54-83.
    5. Baixiao Liu, 2016. "The Disciplinary Role Of Failed Takeover Attempts," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 39(1), pages 63-85, March.
    6. Jeff Madura & Thanh Ngo, 2012. "Re-examination of industry effects due to withdrawn mergers," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(3), pages 613-633, July.

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