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What Drives Acquisitions? Market Valuations and Bidder Performance

Petmezas, Dimitris



Given the recent theoretical development that documents stock market misvaluations’ driven acquisition, this paper examines the relation between market valuations and bidder performance. We focus on hot stock markets and find that bidder reactions to mergers, in both the short- and long-run period, are consistent with the predictions of investors’ sentiment (optimism) after controlling for target type and method of payment. Managers that undertake mergers during bullish periods are rewarded by the generalized upward trend of the market in the short-run. However, this is followed by long-term reversals as the market learns only gradually that many of the mergers undertaken during hot periods were not carefully evaluated and were made under the pressure of ‘urge to merge’ to take advantage of the overall market status of a particular period.


Petmezas, D. (2009). What Drives Acquisitions? Market Valuations and Bidder Performance. Journal of Multinational Financial Management, 19(1), 54-74.

Journal Article Type Article
Acceptance Date May 27, 2008
Online Publication Date Jun 3, 2008
Publication Date 2009-02
Deposit Date Aug 2, 2020
Journal Journal of Multinational Financial Management
Print ISSN 1042-444X
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 19
Issue 1
Pages 54-74
Public URL