New Evidence and Perspectives on Mergers

Harvard Business School Working Paper No. 01-070

HBS Finance Working Paper No. 01-070

32 Pages Posted: 23 May 2001  

Gregor Andrade

Harvard Business School - Finance Unit

Mark L. Mitchell

AQR Capital Management, LLC; CNH Partners

Erik Stafford

Harvard Business School - Finance Unit

Date Written: January 2001

Abstract

As in previous decades, merger activity clusters by industry during the 1990s. One particular kind of industry shock, deregulation, becomes a dominant factor, accounting for nearly half of the merger activity since the late 1980s. In contrast to the 1980s, mergers in the 1990s are mostly stock swaps, and hostile takeovers virtually disappear. Over our 1973 to 1998 sample period, the announcement-period stock market response to mergers is positive for the combined merging parties, suggesting that mergers create value on behalf of shareholders. Consistent with that, we find evidence of improved operating performance following mergers, relative to industry peers.

JEL Classification: G3, L5

Suggested Citation

Andrade, Gregor and Mitchell, Mark L. and Stafford, Erik, New Evidence and Perspectives on Mergers (January 2001). Harvard Business School Working Paper No. 01-070; HBS Finance Working Paper No. 01-070. Available at SSRN: https://ssrn.com/abstract=269313 or http://dx.doi.org/10.2139/ssrn.269313

Gregor M-M. Andrade

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-8018 (Phone)
617-496-8443 (Fax)

Mark L. Mitchell

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

CNH Partners ( email )

Two Greenwich Plaza
1st Floor
Greenwich, CT 06830
United States
(203) 742-3001 (Phone)

Erik Stafford (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-8064 (Phone)
617-496-7357 (Fax)

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