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The Post-Acquisition Returns of Stock Deals: Evidence of the Pervasiveness of the Asset Growth Effect


Sandra Mortal


University of Memphis

Michael J. Schill


University of Virginia – Darden Graduate School of Business Administration

May 8, 2013

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
Darden Business School Working Paper No. 2189038

Abstract:     
A growing literature finds that firm asset growth rates are negatively correlated subsequent stock returns. We show that the poor post-deal returns that have been documented for stock acquisitions are more precisely explained by the return effects associated with systematically larger asset growth rates for stock deals. We find a similar result for other cross-sectional and time-series acquisition effects, including poor returns for glamour deals, weakly monitored deals, and deals done during high valuation periods. We suggest that the distinguishing characteristic associated with poor performing acquisitions is simply their tendency to grow assets.

Number of Pages in PDF File: 64

Keywords: Takeovers, glamour deals, market efficiency, asset growth

JEL Classification: G14, G34

Accepted Paper Series


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Date posted: December 13, 2012 ; Last revised: July 14, 2013

Suggested Citation

Mortal, Sandra and Schill, Michael J., The Post-Acquisition Returns of Stock Deals: Evidence of the Pervasiveness of the Asset Growth Effect (May 8, 2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; Darden Business School Working Paper No. 2189038. Available at SSRN: http://ssrn.com/abstract=2189038 or http://dx.doi.org/10.2139/ssrn.2189038

Contact Information

Sandra Mortal
University of Memphis ( email )
Memphis, TN 38152
United States
(901) 678-4327 (Phone)
(901) 678-0839 (Fax)
HOME PAGE: http://https://umdrive.memphis.edu/scmortal/public/
Michael J. Schill (Contact Author)
University of Virginia – Darden Graduate School of Business Administration ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)
HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm
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