Returns to Acquirers of Public and Subsidiary Targets

Posted: 21 Nov 2015

See all articles by Jeffrey F. Jaffe

Jeffrey F. Jaffe

University of Pennsylvania - Finance Department

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

David Pedersen

Rutgers School of Business-Camden

Torben Voetmann

The Brattle Group; University of San Francisco

Date Written: February 15, 2015

Abstract

Prior research documents that acquirers of public targets earn zero or negative announcement period returns, while acquirers of private and subsidiary targets earn positive returns. This finding is clearly important to managers and stockholders of acquirers and targets. We employ a large sample of public and subsidiary targets to test four previously unexamined theories of the return differential: synergy, target financial liquidity, target valuation uncertainty, and target bid resistance. We find that none of the empirical measures related to these four theories explains the return differential. This is surprising, since the theories have generally found empirical support in other financial areas.

Keywords: Subsidiary sale, Public target, Acquirer CAR

JEL Classification: G3

Suggested Citation

Jaffe, Jeffrey F. and Jindra, Jan and Pedersen, David and Voetmann, Torben, Returns to Acquirers of Public and Subsidiary Targets (February 15, 2015). Journal of Corporate Finance, Vol. 31, April 2015. Available at SSRN: https://ssrn.com/abstract=2693360

Jeffrey F. Jaffe (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-5615 (Phone)
215-898-6200 (Fax)

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

44 Montgomery Street
San Francisco, CA 94104
United States

David Pedersen

Rutgers School of Business-Camden ( email )

227 Penn Street
Camden, NJ 08102
United States

Torben Voetmann

The Brattle Group ( email )

201 Mission Street
Suite 2800
San Francisco, CA 94105
United States
415-217-1000 (Phone)

HOME PAGE: http://www.brattle.com

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

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