The Source of Gains to Targets and Their Industry Rivals: Evidence Based on Terminated Merger Proposals

Financial Management, Vol. 29, Iss. 4, Winter 2000

Posted: 21 Jun 2001

See all articles by Aigbe Akhigbe

Aigbe Akhigbe

University of Akron - Department of Finance

Stephen F. Borde

University of Central Florida - College of Business Administration

Ann Marie Whyte

University of Central Florida

Abstract

We examine merger gains to targets and their industry rivals and find evidence consistent with the signaling hypothesis. We find that targets and rivals benefit from the merger announcement, but termination results in significant negative returns for targets and significant positive returns for rivals. Termination gains to rivals support the hypothesis that rival firms could become acquisition targets. The gains are positively related to subsequent acquisition activity involving the target and the extent of merger activity in the industry, and are inversely related to the relative size of the target rivals, the presence of competing bidders, and the regulatory environment.

Suggested Citation

Akhigbe, Aigbe and Borde, Stephen F. and Whyte, Ann Marie, The Source of Gains to Targets and Their Industry Rivals: Evidence Based on Terminated Merger Proposals. Financial Management, Vol. 29, Iss. 4, Winter 2000, Available at SSRN: https://ssrn.com/abstract=267754

Aigbe Akhigbe (Contact Author)

University of Akron - Department of Finance ( email )

Akron, OH 44325-4803
United States
330-972-6883 (Phone)

Stephen F. Borde

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States
407-823-2977 (Phone)
407-823-6676 (Fax)

Ann Marie Whyte

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

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