Market Learning About the Stand-Alone Value of the Acquirer

55 Pages Posted: 22 Dec 2015 Last revised: 3 Apr 2019

See all articles by Krisztina Buti

Krisztina Buti

University of California at San Diego

Avner Kalay

Tel Aviv University - Faculty of Management; University of Utah - David Eccles School of Business

Date Written: April 1, 2019

Abstract

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

Buti, Krisztina and Kalay, Avner, Market Learning About the Stand-Alone Value of the Acquirer (April 1, 2019). Available at SSRN: https://ssrn.com/abstract=2706137 or http://dx.doi.org/10.2139/ssrn.2706137

Krisztina Buti

University of California at San Diego ( email )

San Diego, CA

Avner Kalay (Contact Author)

Tel Aviv University - Faculty of Management ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel
972 3 6406298 (Phone)
972 3 6406330 (Fax)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801-581-5457 (Phone)

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