Why Bidders Lose?

14 Pages Posted: 1 Jul 2013 Last revised: 7 Jul 2013

See all articles by Yakov Amihud

Yakov Amihud

New York University - Stern School of Business

Gayle L. DeLong

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Andrey Golubov

University of Toronto - Rotman School of Management

Date Written: June 30, 2013

Abstract

This paper tests the hypothesis of Jovanovic and Braguinsky (AER, 2004) that acquisition attempts convey negative information about the bidder’s existing projects. We study failed acquisition bids, which enable a before-and-after comparison of the bidder firm as is without the acquisition effects. We find that following failed bids, bidder firms exhibit a significant decline in operating performance. The performance decline is correlated with the stock price change during the bidding period. If the stock price reaction to acquisition announcements partly reflects negative information about bidders’ existing assets, stock-returns-based measures of value creation from acquisitions are underestimated.

Keywords: Mergers and Acquisitions, Failed Bids, Operating Performance, Stock Market Reaction; Stand-Alone Value

JEL Classification: G14, G34, D82

Suggested Citation

Amihud, Yakov and DeLong, Gayle L. and Golubov, Andrey, Why Bidders Lose? (June 30, 2013). Available at SSRN: https://ssrn.com/abstract=2287569 or http://dx.doi.org/10.2139/ssrn.2287569

Yakov Amihud (Contact Author)

New York University - Stern School of Business ( email )

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Gayle L. DeLong

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

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New York, NY 10010
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HOME PAGE: http://faculty.baruch.cuny.edu/gdelong

Andrey Golubov

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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