Market Learning About the Stand-Alone Value of the Acquirer
55 Pages Posted: 22 Dec 2015 Last revised: 3 Apr 2019
Date Written: April 1, 2019
This paper presents new empirical evidence suggesting that the market evaluates acquisition announcements in the context of the firm's investment policy. When a firm with superior prior internal investment purchases another, market participants often learn from the acquisition, that internal investment opportunities facing the acquirer are more limited than previously believed. This revelation prompts market participants to make a negative adjustment to the firm's stand-alone value even in the presence of positive synergies.
Keywords: mergers and acquisitions, investment policy, market learning
JEL Classification: G31, G34
Suggested Citation: Suggested Citation