Citations (30)



Stock Returns in Mergers and Acquisitions

Erwan Morellec

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

Dirk Hackbarth

Boston University Questrom School of Business

October 2006

Swiss Finance Institute Research Paper No. 06-1
EFA 2006 Zurich Meetings Paper

This paper develops a real options framework to analyze the behavior of stock returns in mergers and acquisitions. In this framework, the timing and terms of takeovers are endogenous and result from value-maximizing decisions. The implications of the model for abnormal announcement returns are consistent with the available empirical evidence. In addition, the model generates new predictions regarding the dynamics of firm-level betas for the time period surrounding control transactions. Using a sample of 1090 takeovers of publicly traded US firms between 1985 and 2002, we present new evidence on the dynamics of firm-level betas, which is strongly supportive of the model's predictions.

Number of Pages in PDF File: 44

Keywords: takeovers, real options, stock returns, firm-level betas

JEL Classification: G13, G14, G31, G34

Open PDF in Browser Download This Paper

Date posted: March 3, 2006  

Suggested Citation

Morellec, Erwan and Hackbarth, Dirk, Stock Returns in Mergers and Acquisitions (October 2006). Swiss Finance Institute Research Paper No. 06-1; EFA 2006 Zurich Meetings Paper. Available at SSRN: http://ssrn.com/abstract=886714 or http://dx.doi.org/10.2139/ssrn.886714

Contact Information

Erwan Morellec (Contact Author)
Ecole Polytechnique Fédérale de Lausanne ( email )
College of Management
Extranef Quartier UNIL-Dorigny
1015 Lausanne, CH-1015
HOME PAGE: http://sfi.epfl.ch/
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Dirk Hackbarth
Boston University Questrom School of Business ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
(617) 358-4206 (Phone)
(617) 353-6667 (Fax)
HOME PAGE: http://people.bu.edu/dhackbar/
Feedback to SSRN

Paper statistics
Abstract Views: 7,179
Downloads: 2,279
Download Rank: 3,382
Citations:  30

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.344 seconds