Journal of Financial Economics Vol. 8 No. 2 1980
Merger proposals, management discretion and stockholder wealth
Abstract
This paper provides evidence on the daily market reaction to the announcement and subsequent acceptance or rejection of merger proposals. There is a swift and large positive market reaction to the first public announcement of the merger proposal. Subsequently, there is a positive reaction to the approval of completed proposals and a negative reaction to cancelled proposals. Where proposals are vetoed by incumbent target management, there is a negative market reaction to the veto, but this does not eliminate the earlier positive reaction to the first announcement. In these proposals there is a permanent revaluation of the target shares. This is in contrast to cancelled proposals that incumbent managements do not veto, where the target stock price falls back, on average, to the preproposal level.
- DOI
- 10.1016/0304-405x(80)90014-8
- Volume
- 8
- Issue
- 2
- Pages
- 105-137
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref