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Revisiting acquirer returns: Evidence from unanticipated deals

Tunyi Tunyi Abongeh Orcid Logo

Journal of Corporate Finance, Volume: 66, Issue: 3, Pages: 101789 - 261

Swansea University Author: Tunyi Tunyi Abongeh Orcid Logo

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DOI (Published version): 10.1016/j.jcorpfin.2020.101789

Abstract

This paper examines the implications of market anticipation of impending merger and acquisition (M&A) deals on the assessment of acquirer wealth effects through event study methods. We find evidence suggesting that prior studies have understated the gains to acquirers. The documented negative or...

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Published in: Journal of Corporate Finance
ISSN: 0929-1199 1467-6303
Published: Elsevier BV 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa65020
first_indexed 2023-11-20T17:36:38Z
last_indexed 2024-11-25T14:15:12Z
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recordtype SURis
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spelling 2024-01-02T15:30:49.8058182 v2 65020 2023-11-20 Revisiting acquirer returns: Evidence from unanticipated deals eefe2792c8eed5b49feede33981dfa53 0000-0002-5761-931X Tunyi Tunyi Abongeh Tunyi Tunyi Abongeh true false 2023-11-20 CBAE This paper examines the implications of market anticipation of impending merger and acquisition (M&A) deals on the assessment of acquirer wealth effects through event study methods. We find evidence suggesting that prior studies have understated the gains to acquirers. The documented negative or near-zero abnormal returns to acquirers appears to be confined to sub-samples of highly-anticipated deals. By contrast, unanticipated acquirers gain significantly from M&As, achieving average cumulative abnormal returns of 5.4% to 7.5% in the seven days around the bid announcement. Empirically, we show that market anticipation partly explains (1) the documented low returns to acquirers, (2) the positive abnormal return spillover to close rivals of acquirers, and (3) the declining returns to serial acquirers across successive deals. Overall, our study provides evidence against several stylised facts and sheds light on the puzzle that M&A activity persists despite recurrent research findings that they do not create value for acquirers. Journal Article Journal of Corporate Finance 66 3 101789 261 Elsevier BV 0929-1199 1467-6303 Acquirers, Event studies, Takeovers, Market anticipation, Rivals, Serial acquirers 28 2 2021 2021-02-28 10.1016/j.jcorpfin.2020.101789 http://dx.doi.org/10.1016/j.jcorpfin.2020.101789 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University 2024-01-02T15:30:49.8058182 2023-11-20T17:35:43.7389925 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Tunyi Tunyi Abongeh 0000-0002-5761-931X 1
title Revisiting acquirer returns: Evidence from unanticipated deals
spellingShingle Revisiting acquirer returns: Evidence from unanticipated deals
Tunyi Tunyi Abongeh
title_short Revisiting acquirer returns: Evidence from unanticipated deals
title_full Revisiting acquirer returns: Evidence from unanticipated deals
title_fullStr Revisiting acquirer returns: Evidence from unanticipated deals
title_full_unstemmed Revisiting acquirer returns: Evidence from unanticipated deals
title_sort Revisiting acquirer returns: Evidence from unanticipated deals
author_id_str_mv eefe2792c8eed5b49feede33981dfa53
author_id_fullname_str_mv eefe2792c8eed5b49feede33981dfa53_***_Tunyi Tunyi Abongeh
author Tunyi Tunyi Abongeh
author2 Tunyi Tunyi Abongeh
format Journal article
container_title Journal of Corporate Finance
container_volume 66
container_issue 3
container_start_page 101789
publishDate 2021
institution Swansea University
issn 0929-1199
1467-6303
doi_str_mv 10.1016/j.jcorpfin.2020.101789
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1016/j.jcorpfin.2020.101789
document_store_str 0
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description This paper examines the implications of market anticipation of impending merger and acquisition (M&A) deals on the assessment of acquirer wealth effects through event study methods. We find evidence suggesting that prior studies have understated the gains to acquirers. The documented negative or near-zero abnormal returns to acquirers appears to be confined to sub-samples of highly-anticipated deals. By contrast, unanticipated acquirers gain significantly from M&As, achieving average cumulative abnormal returns of 5.4% to 7.5% in the seven days around the bid announcement. Empirically, we show that market anticipation partly explains (1) the documented low returns to acquirers, (2) the positive abnormal return spillover to close rivals of acquirers, and (3) the declining returns to serial acquirers across successive deals. Overall, our study provides evidence against several stylised facts and sheds light on the puzzle that M&A activity persists despite recurrent research findings that they do not create value for acquirers.
published_date 2021-02-28T14:35:27Z
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score 11.247077

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