What Do Returns to Acquiring Firms Tell Us? Evidence from Firms that Make Many Acquisitions
Kathleen P. Fuller
University of Mississippi - School of Business Administration
Jeffry M. Netter
University of Georgia - Department of Banking and Finance; University of Georgia Law School
Journal of Finance, Vol. 57, No. 4, August 2002
We study shareholder returns for firms that acquired five or more public, private, and/or subsidiary targets within a short time period. Since the same bidder chooses different types of targets and methods of payment, any variation in returns must be due to the characteristics of the target and the bid. Results indicate bidder shareholders gain when buying a private firm or subsidiary but lose when purchasing a public firm. Further, the return is greater the larger the target and if the bidder offers stock. These results are consistent with a liquidity discount, and tax and control effects in this market.
Keywords: merger, acquisition, private firms, public firms, liquidity discount
JEL Classification: G34Accepted Paper Series
Date posted: August 5, 2002
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