Post-Acquisition Performance in the Short and Long Run: Evidence from the Copenhagen Stock Exchange 1993-1997

European Journal of Finance, Vol. 9, No. 4, pp. 323-342, August 2003

Posted: 3 Apr 2008

See all articles by Jan Bo Jakobsen

Jan Bo Jakobsen

Invensure

Torben Voetmann

The Brattle Group; University of San Francisco

Abstract

The paper investigates the short-run price adjustment around acquisition announcements and the long-run upward bias of cross-sectional average buy-and-hold returns. The geometric Brownian motion model is applied to decompose the cross-sectional average long-run returns into transformed mean and volatility components. The decomposition improves the interpretation of security performance. The methodology is demonstrated on the security performance of bidding firms listed on the Copenhagen Stock Exchange. The most surprising finding is that the long-run abnormal return after three years is not significantly different from zero. This implies that the bidding firms do not under-perform relative to the market. This result stands in contrast to findings in other studies and it may reflect that earlier studies do not adjust correctly for the volatility component. These current findings indicate that the market efficiency hypothesis is intact in the long run. It is only in the very short run, a few days around acquisition announcements, that the market makes a significant adjustment to uphold the efficiency hypothesis.

Keywords: Event-study methodology, Wealth relatives, Long-run returns, Acquisitions, Right-skewness

JEL Classification: G14

Suggested Citation

Jakobsen, Jan Bo and Voetmann, Torben, Post-Acquisition Performance in the Short and Long Run: Evidence from the Copenhagen Stock Exchange 1993-1997. European Journal of Finance, Vol. 9, No. 4, pp. 323-342, August 2003. Available at SSRN: https://ssrn.com/abstract=1115946

Jan Bo Jakobsen

Invensure ( email )

Netherlands

Torben Voetmann (Contact Author)

The Brattle Group ( email )

201 Mission Street
Suite 2800
San Francisco, CA 94105
United States
415-217-1000 (Phone)

HOME PAGE: http://www.brattle.com

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

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