Journal of Finance Vol. 81 No. 3 2026

The (Missing) Relation between Acquisition Announcement Returns and Value Creation

Itzhak Ben-David¹; Utpal Bhattacharya; Ruidi Huang; Stacey Jacobsen^2,3,4,5

¹ The Ohio State University · ² Texas Tech University · ³ Baylor University · ⁴ Chinese University of Hong Kong · ⁵ Southern Methodist University

Abstract

Cumulative abnormal returns (CARs) computed around acquisition announcements are widely considered to be market‐based assessments of expected value creation. We show, however, that announcement returns do not correlate with commonly used and new measures of ex post outcomes. A simple characteristics‐based model using standard information known at the announcement date can predict these outcomes reasonably well, yet CAR even fails to capture the predictions from this model. Evidence suggests that information about the stand‐alone acquirer dominates CAR, making it virtually impossible to extract deal‐related information. We conclude that CAR is an unreliable measure of expected value creation.

DOI

10.1111/jofi.70038

Volume

81

Issue

3

Pages

1265-1320

Language

en

Sources

openalex crossref

Cite

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