Abstract

http://ssrn.com/abstract=1104842
 
 

References (62)



 
 

Citations (2)



 


 



How Much is Too Much: Are Merger Premiums Too High?


Antonios Antoniou


Wealth Associates

Philippe Arbour


Lloyds TSB Corporate Markets

Huainan Zhao


Cranfield University - School of Management


European Financial Management, Vol. 14, Issue 2, pp. 268-287, March 2008

Abstract:     
Is it too much to pay target firm shareholders a 50% premium on top of market price? Or is it too much to pay a 100% premium when pursuing mergers and acquisitions? How much is too much? In this paper, we examine how the extent of merger premiums paid impacts both the long-run and announcement period stock returns of acquiring firms. We find no evidence that acquirers paying high premiums underperform those paying relatively low premiums in three years following mergers, and the result is robust after controlling for a variety of firm and deal characteristics. Short term cumulative abnormal returns are moreover positively correlated to the level of the premium paid by acquirers. Our evidence therefore suggests that high merger premiums paid are unlikely to be responsible for acquirers' long-run post merger underperformance.

Number of Pages in PDF File: 20

Accepted Paper Series





Date posted: March 12, 2008  

Suggested Citation

Antoniou, Antonios and Arbour, Philippe and Zhao, Huainan, How Much is Too Much: Are Merger Premiums Too High?. European Financial Management, Vol. 14, Issue 2, pp. 268-287, March 2008. Available at SSRN: http://ssrn.com/abstract=1104842 or http://dx.doi.org/10.1111/j.1468-036X.2007.00404.x

Contact Information

Antonios Antoniou
Wealth Associates ( email )
Alpine House,
Honeypot Lane
London, NW9 9RX
United Kingdom
Philippe Arbour
Lloyds TSB Corporate Markets ( email )
London
United Kingdom
Huainan Zhao
Cranfield University - School of Management ( email )
Cranfield University
Cranfield, Bedfordshire MK43 0AL
United Kingdom
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