Download this Paper Open PDF in Browser

The Post-Acquisition Returns of Stock Deals: Evidence of the Pervasiveness of the Asset Growth Effect

64 Pages Posted: 13 Dec 2012 Last revised: 14 Jul 2013

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration

Michael J. Schill

University of Virginia ­ Darden School of Business

Date Written: May 8, 2013

Abstract

A growing literature finds that firm asset growth rates are negatively correlated subsequent stock returns. We show that the poor post-deal returns that have been documented for stock acquisitions are more precisely explained by the return effects associated with systematically larger asset growth rates for stock deals. We find a similar result for other cross-sectional and time-series acquisition effects, including poor returns for glamour deals, weakly monitored deals, and deals done during high valuation periods. We suggest that the distinguishing characteristic associated with poor performing acquisitions is simply their tendency to grow assets.

Keywords: Takeovers, glamour deals, market efficiency, asset growth

JEL Classification: G14, G34

Suggested Citation

Mortal, Sandra and Schill, Michael J., The Post-Acquisition Returns of Stock Deals: Evidence of the Pervasiveness of the Asset Growth Effect (May 8, 2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; Darden Business School Working Paper No. 2189038. Available at SSRN: https://ssrn.com/abstract=2189038 or http://dx.doi.org/10.2139/ssrn.2189038

Sandra Mortal

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

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

Michael J. Schill (Contact Author)

University of Virginia ­ Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

Paper statistics

Downloads
218
Rank
118,047
Abstract Views
864