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Evidence of Excess Comovement in US Mergers

Author

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  • Per Östberg

    (University of Zurich, Ecole Polytechnique Fédérale de Lausanne, and Swiss Finance Institute)

  • Christoph Wenk

    (University of Zurich)

Abstract

This paper considers changes in market comovement of merging US firms. Comparing the expected to the actual post merger comovement, we find that the post merger beta exhibits excess comovement with the acquiring firm. This suggests that the firm’s comovement is at least partly determined by its investors. We find that the excess comovement is significantly greater in cash transactions, when target shareholders tender their entire stake, than in pure stock transactions. Additionally, we document that the excess comovement is greater when the target is included in the S&P 500 as a result of the merger.

Suggested Citation

  • Per Östberg & Christoph Wenk, 2012. "Evidence of Excess Comovement in US Mergers," Swiss Finance Institute Research Paper Series 12-33, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1233
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    File URL: http://ssrn.com/abstract=2175597
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    More about this item

    Keywords

    Mergers; Comovement; Segmentation; Method of Payment; Index Inclusion;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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