An Analysis of Merger Induced Non-Stationarity in Market Model Parameters of Acquiring Firms

Quarterly Journal of Business And Economics, Vol. 29, No. 3, pp. 56-89, 1990

Posted: 27 Aug 2014

See all articles by Ronald E. Shrieves

Ronald E. Shrieves

University of Tennessee, Knoxville - Department of Finance

Michael H. Lubatkin

University of Connecticut - Department of Management

Date Written: 1990

Abstract

This paper formulates a modification of the market model methodology that allows direct testing for the impact of mergers on market model parameters, while simultaneously estimating acquiring firm abnormal stockholder returns. A large sample of merger events is stratified in three ways: conglomerate versus non conglomerate, stock versus cash transactions, and by merger activity level. Results of prior studies are examined for sensitivity to a failure to appropriately incorporate the impact of merger on market model parameters. Results indicate that negative drift in post announcement returns for acquiring firms is partly the result of parameter shifts.

Suggested Citation

Shrieves, Ronald E. and Lubatkin, Michael, An Analysis of Merger Induced Non-Stationarity in Market Model Parameters of Acquiring Firms (1990). Quarterly Journal of Business And Economics, Vol. 29, No. 3, pp. 56-89, 1990, Available at SSRN: https://ssrn.com/abstract=2487422

Ronald E. Shrieves (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

Knoxville, TN 37996
United States

Michael Lubatkin

University of Connecticut - Department of Management ( email )

Storrs, CT 06269-1041
United States

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