Empirical Examination of Wealth Effects of Mergers and Acquisitions: The U.S. Economy in Perspective

Journal of Financial Management and Analysis Vol. 24 No.2 (Jul-Dec 2011)

Posted: 4 Apr 2012

See all articles by Demetres Subeniotis

Demetres Subeniotis

University of Macedonia

Ioannis Tampakoudis

University of Macedonia - Department of Business Administration

Ioannis Kroustalis

University of Macedonia

Markos Poulios

affiliation not provided to SSRN

Date Written: March 30, 2012

Abstract

The last fifth merger wave in the U.S. commenced in 1992 due to deregulation and globalization trends. Until 2003, the merger activity in the U.S. market exceeded $ 5 trillion, while the year of 2005 demonstrates particular interest taking into account the companies that engaged in business consolidations. The main objective of the present event study is to assess the wealth effects arising to acquiring and acquired companies’ shareholders during 2005 in the U.S. stock market. Indeed, the economic consequences to the former are insignificant considering the very low abnormal returns that either do not show statistical significance or are negative. On the contrary, target companies gain substantial abnormal returns above 10% at the announcement day. In fact, the pattern of returns is in accordance with previous literature and despite the fundamental reasons that drive companies to mergers and acquisitions, the empirical findings remain similar diachronically.

Keywords: Mergers, Acquisitions, Abnormal returns, Event study, U.S. stock market

JEL Classification: C52, D31, F36, G34, O51

Suggested Citation

Subeniotis, Demetres and Tampakoudis, Ioannis and Kroustalis, Ioannis and Poulios, Markos, Empirical Examination of Wealth Effects of Mergers and Acquisitions: The U.S. Economy in Perspective (March 30, 2012). Journal of Financial Management and Analysis Vol. 24 No.2 (Jul-Dec 2011), Available at SSRN: https://ssrn.com/abstract=2032149

Demetres Subeniotis (Contact Author)

University of Macedonia ( email )

156 Egnatia St.
P.O. 1591
Thessaloniki, 54006
Greece

Ioannis Tampakoudis

University of Macedonia - Department of Business Administration ( email )

Thessaloniki
Greece

Ioannis Kroustalis

University of Macedonia ( email )

156 Egnatia St.
P.O. 1591
Thessaloniki, 54006
Greece

Markos Poulios

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,012
PlumX Metrics