A Bold Move or Biting off More than They Can Chew: Examining the Performance of Small Acquirers

56 Pages Posted: 22 Aug 2012 Last revised: 5 Nov 2019

See all articles by Nancy L. Harp

Nancy L. Harp

Clemson University

Kevin H. Kim

Korea Advanced Institute of Science and Technology (KAIST)

Derek Oler

Texas Tech University - Rawls College of Business

Date Written: November 1, 2019

Abstract

Small acquirers enjoy announcement period returns that are significantly higher than announcement returns for larger acquirers, but small acquirers significantly underperform after the acquisition is consummated. We investigate why the market appears to “get it wrong” at the announcement of an acquisition by a small firm. We provide evidence consistent with an initial optimistic overreaction, followed by a correction as updated information is revealed. Overreaction is clustered in small acquirers offering stock and acquiring relatively larger targets. Low post-acquisition returns and poor fundamental performance are clustered in small acquirers offering stock and diversifying.

Keywords: acquisitions, post-acquisition returns, small acquirers, trading volume, fundamental performance

JEL Classification: G12, G14, G34, M41

Suggested Citation

Harp, Nancy and Kim, Kevin and Oler, Derek, A Bold Move or Biting off More than They Can Chew: Examining the Performance of Small Acquirers (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=2134391 or http://dx.doi.org/10.2139/ssrn.2134391

Nancy Harp

Clemson University ( email )

Clemson, SC 29631
United States
864-656-0431 (Phone)

Kevin Kim

Korea Advanced Institute of Science and Technology (KAIST) ( email )

373-1 Kusong-dong
Yuson-gu
Taejon 305-701, 130-722
Korea, Republic of (South Korea)

Derek Oler (Contact Author)

Texas Tech University - Rawls College of Business ( email )

P.O. Box 42101
Lubbock, TX 79409
United States
806-834-2354 (Phone)
806-742-3182 (Fax)

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