Stock Price Performances of Target Firms in Unsuccessful Acquisitions

Abstract:     
This paper examines the stock price returns of 459 targets in unsuccessful M&A deals from 1990 to 2001. An information hypothesis that includes new information arrived after the M&A proposal explains better than the synergy hypothesis the evidence for failed acquisitions. The average abnormal return announcement to termination is a negative 10.61%. Abnormal returns vary according to the identity of the party who terminates the deal. When the target firm rejects a deal, the target stock price drops by 4.33%. The loss is 14.49% when the bidder terminates the deal. In the long-run, abnormal returns are generally insignificant.

Keywords: M&A, unsuccessful acquisitions, failed mergers, target firm, event study

JEL Classifications: G34

Working Paper Series