Merger momentum and market valuations: the UK evidence

Antoniou, Antonios; Guo, Michael (Jie); Petmezas, Dimitris

Abstract

This study examines the effect of merger momentum on acquirer's returns both in the short and long-run. The focus is on high valuation markets and the source of momentum is investigated employing three different hypotheses: the neoclassical hypothesis, the hubris hypothesis and the investor sentiment theory. Evidence is provided that supports the investor sentiment (optimism) hypothesis since it is demonstrated that investors earn significant gains in the short run but returns are reversed in the long-run as initial expectations may not be fully met when combined firms' accomplishments become known over time. The results are robust after controlling for several acquirer and deal characteristics.

Citation

Antoniou, A., Guo, M. (., & Petmezas, D. (2008). Merger momentum and market valuations: the UK evidence. Applied financial economics, 18(17), 1411-1423. https://doi.org/10.1080/09603100701720468

• Journal Article Type: Article
• Publication Date: Jan 1, 2008
• Deposit Date: May 22, 2009
• Journal: Applied Financial Economics
• Print ISSN: 0960-3107
• Electronic ISSN: 1466-4305
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 18
• Issue: 17
• Pages: 1411-1423
• DOI: https://doi.org/10.1080/09603100701720468
• Public URL: https://durham-repository.worktribe.com/output/1535775