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What Do Returns to Acquiring Firms Tell Us? Evidence from Firms that Make Many Acquisitions

Posted: 5 Aug 2002  

Kathleen P. Fuller

University of Mississippi - School of Business Administration

Jeffry M. Netter

University of Georgia - Department of Banking and Finance; University of Georgia Law School

Mike Stegemoller

Baylor University

Abstract

We study shareholder returns for firms that acquired five or more public, private, and/or subsidiary targets within a short time period. Since the same bidder chooses different types of targets and methods of payment, any variation in returns must be due to the characteristics of the target and the bid. Results indicate bidder shareholders gain when buying a private firm or subsidiary but lose when purchasing a public firm. Further, the return is greater the larger the target and if the bidder offers stock. These results are consistent with a liquidity discount, and tax and control effects in this market.

Keywords: merger, acquisition, private firms, public firms, liquidity discount

JEL Classification: G34

Suggested Citation

Fuller, Kathleen P. and Netter, Jeffry M. and Stegemoller, Mike, What Do Returns to Acquiring Firms Tell Us? Evidence from Firms that Make Many Acquisitions. Journal of Finance, Vol. 57, No. 4, August 2002. Available at SSRN: https://ssrn.com/abstract=313620

Kathleen Petrie Fuller

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Jeffry M. Netter (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States
706-542-3654 (Phone)

HOME PAGE: http://www.terry.uga.edu/finance/facultyprofiles/n

University of Georgia Law School

225 Herty Drive
Athens, GA 30602
United States

Michael A. Stegemoller

Baylor University ( email )

P.O. Box 98004
Waco, TX 76798-8004
United States
254-710-4145 (Phone)

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