Journal of Financial Economics Vol. 11 No. 1-4 1983
The wealth effect of merger activity and the objective functions of merging firms
Abstract
This paper studies the net effects of the long-run sequence of events leading to merger, and of merger per se, on shareholder wealth. The appropriate measure of the wealth effect is shown to be the abnormal dollar return cumulated over time. Using this measure, the long-run wealth effect of the event sequence culminating in merger is significantly negative for acquiring firms. For acquired firms, the effect is negative, but not significant. The immediate impact of merger per se is positive and highly significant for acquired firms but larger in absolute value, and negative for acquiring firms. The evidence also reveals that measured abnormal rates of return to acquiring firms are sensitive to a slight variation in model specification and dependent on firm size, with smaller firms earning significantly negative post-merger returns.
- DOI
- 10.1016/0304-405x(83)90009-0
- Volume
- 11
- Issue
- 1-4
- Pages
- 155-181
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref