Do Long‐Term Shareholders Benefit From Corporate Acquisitions?

Tim Loughran B · Anand M. Vijh

966 citations0/0 files storedThe Journal of Finance

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Corporate Finance and Governance Financial Markets and Investment Strategies Merger and Competition Analysis

Abstract

ABSTRACT Using 947 acquisitions during 1970–1989, this article finds a relationship between the postacquisition returns and the mode of acquisition and form of payment. During a five‐year period following the acquisition, on average, firms that complete stock mergers earn significantly negative excess returns of −25.0 percent whereas firms that complete cash tender offers earn significantly positive excess returns of 61.7 percent. Over the combined preacquisition and postacquisition period, target shareholders who hold on to the acquirer stock received as payment in stock mergers do not earn significantly positive excess returns. In the top quartile of target to acquirer size ratio, they earn negative excess returns.

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1984Corporate financing and investment decisions when firms have information that investors do not have 1992The Cross-Section of Expected Stock Returns 1983The market for corporate control 1988Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms 1992The Post-Merger Performance of Acquiring Firms: A Re-Examination of an Anomaly 1995Underperformance in long-run stock returns following seasoned equity offerings 1983Merger bids, uncertainty, and stockholder returns

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