Firm Size, Serial and Non-Serial Acquisition, and Stockholder Wealth
55 Pages Posted: 15 Mar 2016 Last revised: 5 Feb 2018
Date Written: February 4, 2018
Acquisitions by larger firms seem to generate less wealth for acquirer stockholders than acquisitions by smaller firms. In this paper, we re-examine the ‘size effect’, but separately for serial and non-serial acquisition. We find sample-selection bias results in a spurious size effect for non-serial deals, but that it does not affect the size effect for serial deals. Our results suggest this is because smaller non-serial acquirers require greater time-varying synergies than larger non-serial acquirers. In contrast, larger serial acquirers are associated with persistent synergies to a greater extent than smaller serial acquirers. Our findings are consistent with rational managerial behavior.
Keywords: firm size; acquisition; serial acquirer; stockholder wealth; sample-selection bias
JEL Classification: G34
Suggested Citation: Suggested Citation