Measuring Deal Premiums in Takeovers

Forthcoming, Financial Management

25 Pages Posted: 4 Jun 2012 Last revised: 19 Jan 2016

See all articles by J. Harold Mulherin

J. Harold Mulherin

University of Georgia - Department of Banking and Finance

Serif Aziz Simsir

Sabanci University

Date Written: August 30, 2013


We investigate whether the merger announcement dates provided in the Securities Data Corporation (SDC) database, a commonly used source in mergers and acquisitions (M&A) research, are handled correctly by researchers performing event studies to measure the wealth effects of mergers. We find that in a non-trivial number of deals, the popular choice of using the SDC’s “Date Announced” (DA) field as the event date leads to biased estimates of target firm abnormal returns because of earlier abnormal price movements due to merger-related events such as merger rumors or search-for-buyer types of announcements. We capture market reactions around these early dates with the “Original Date Announced” (ODA) field in the SDC database. Target firms’ stock prices increase by an average of 12.6% around the ODA and another 11% around the DA. We argue that the proper event windows should include the market reactions around both dates. Our analysis also includes the characteristics of target firms that are involved in such events, acquirer abnormal returns around the ODA and the accuracy of the ODA in capturing the early dates.

Keywords: Mergers and Acquisitions, Event Study, Cumulative Abnormal Returns, Offer Premiums, Merger Rumors, Strategic Alternatives

JEL Classification: G34, G14

Suggested Citation

Mulherin, J. Harold and Simsir, Serif Aziz, Measuring Deal Premiums in Takeovers (August 30, 2013). Forthcoming, Financial Management. Available at SSRN: or

J. Harold Mulherin

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States
706-542-3644 (Phone)

Serif Aziz Simsir (Contact Author)

Sabanci University ( email )

School of Management
Istanbul, Orhanli, 34956 Tuzla

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