Disentangling the Link between Stock and Accounting Performance in Acquisitions
BUW- Schumpeter School of Business and Economics
Cardiff University - Cardiff Business School; European Corporate Governance Institute (ECGI)
July 1, 2009
ECGI - Finance Working Paper No. 259/2009
While empirical studies that use event-study methodology find on average that the gains from mergers and acquisitions are positive, those focusing on accounting figures tend to find a significant drop in performance. We argue that each of the four possible combinations between positive or negative abnormal stock returns and accounting performance is due to a distinct acquisition motive. We find strong empirical evidence in support of this claim.
Number of Pages in PDF File: 60
Keywords: Mergers and acquisitions, performance measurement, synergies, preemption, overvaluation, corporate governance, agency problems
JEL Classification: G34, G3, G14working papers series
Date posted: September 20, 2009 ; Last revised: October 28, 2010
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