The Post-Merger Performance Puzzle

59 Pages Posted: 5 Jan 2000

See all articles by Anup Agrawal

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Jeffrey F. Jaffe

University of Pennsylvania - Finance Department

Multiple version iconThere are 2 versions of this paper

Date Written: December 1999

Abstract

While the bulk of the research on the financial performance of mergers and acquisitions has focused on stock returns around the merger announcement, a surprisingly large set of papers has also examined long-run stock returns following acquisitions. We review this literature, concluding that long-run performance is negative following mergers, though performance is non-negative (and perhaps even positive) following tender offers. However, the effects of both methodology (see Lyon, Barber and Tsai (1999)) and chance (see Fama (1998)) may modify this conclusion. Two explanations of under-performance (speed of price-adjustment and EPS myopia) are not supported by the data, while two other explanations (method of payment and performance extrapolation) receive greater support.

JEL Classification: G14, G34

Suggested Citation

Agrawal, Anup and Jaffe, Jeffrey F., The Post-Merger Performance Puzzle (December 1999). Available at SSRN: https://ssrn.com/abstract=199671 or http://dx.doi.org/10.2139/ssrn.199671

Anup Agrawal (Contact Author)

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
EFLS, Box 870224
Tuscaloosa, AL 35487-0224
United States
205-348-8970 (Phone)
205-348-0590 (Fax)

HOME PAGE: http://aagrawal.people.ua.edu/

Jeffrey F. Jaffe

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-5615 (Phone)
215-898-6200 (Fax)

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