Bidder Gains and Losses of Firms Involved in Many Acquisitions

Antoniou, Antonios; Petmezas, Dimitris; Zhao, Huainan

Abstract

We examine shareholders' wealth effects (both in the short- and the long-run) of UK frequent bidders acquiring public, private, and/or subsidiary targets with alternative methods of payment between 1987 and 2004. We find that, in the short-run, bidders break even when acquiring public targets and gain significantly when buying private and subsidiary targets. This result is robust after controlling for relative size, bidder's book-to-market ratio, target origin, and industry diversification. Our long-run evidence, however, reveals that acquirers experience, significant wealth losses regardless of the target type acquired, indicating that markets may initially overreact to the acquisition announcement. As a result, we argue that contrary to Fuller et al. (2002) who suggest that acquiring private and subsidiary firms creates value for bidding firms, a reliable conclusion on bidders' shareholders wealth effects cannot be based solely on a short-run event study.

Citation

Antoniou, A., Petmezas, D., & Zhao, H. (2007). Bidder Gains and Losses of Firms Involved in Many Acquisitions. Journal of Business Finance and Accounting, 34(7-8), 1221-1244. https://doi.org/10.1111/j.1468-5957.2007.02012.x

• Journal Article Type: Article
• Publication Date: 2007-10
• Deposit Date: Aug 19, 2008
• Journal: Journal of business finance & accounting
• Print ISSN: 0306-686X
• Electronic ISSN: 1468-5957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 34
• Issue: 7-8
• Pages: 1221-1244
• DOI: https://doi.org/10.1111/j.1468-5957.2007.02012.x
• Public URL: https://durham-repository.worktribe.com/output/1551970