The Impact of Diversifying Acquisitions on Shareholder Wealth: Evidence from Turkish Acquirers

Abstract

This study examines the impact of diversifying acquisitions on acquiring Turkish firms. Using a sample of 98 acquisitions during 2000-2011, the study finds that acquiring firms experience statistically significant wealth gains surrounding the announcement date. The cross-sectional regression results show that diversifying acquisitions create higher wealth gains to acquirers compared with focused acquisitions. The results also show that smaller firms experience higher abnormal returns compared to larger firms and that acquiring public firms result in higher wealth gains to acquirers. Finally, the findings indicate that results differ among group affiliates and independent firms. If an acquisition is made by an independent firm, diversifying acquisitions generate higher abnormal returns compared to focused acquisitions. However, if the acquirer is a group affiliate, there is no significant difference between the two types of acquisition activities in terms of wealth effects.

Keywords: Shareholder Value, Wealth Effect, Stock Prices, Turkish Market

JEL Classification: G14, G20, G34