Do Merges and Acquisitions Create Value for Shareholders?

25 Pages Posted: 22 Oct 2020

See all articles by Abdulmuhsen S. Alkhalaf

Abdulmuhsen S. Alkhalaf

George Washington University - Department of Economics; Saint Mary's University, Canada - Sobey School of Business

Date Written: July 2017

Abstract

This paper investigates whether M&A create value for the firm and its shareholders. Using data on M&A announcement made by publicly listed firms in the United States in 2003, it conducts a standard event study by calculating the cumulative abnormal return around [-1, 0, +1], where -1 is the one trading day prior to the M&A announcement, 0 is the day of the announcement, and +1 is one trading-day after the announcement. It finds that M&A deals were, on average, value enhancing for firms over the short horizon. It also shows that firm size has a negative and statistically significant relationship with the cumulative abnormal return. Firms with small size are likely to have a positive cumulative abnormal return from M&A deals. In other words, small firms would benefit most on average from M&A deals.

Keywords: Mergers and Acquisitions, Value Creation

JEL Classification: G30, G34

Suggested Citation

S. Alkhalaf, Abdulmuhsen, Do Merges and Acquisitions Create Value for Shareholders? (July 2017). Available at SSRN: https://ssrn.com/abstract=3686637 or http://dx.doi.org/10.2139/ssrn.3686637

Abdulmuhsen S. Alkhalaf (Contact Author)

George Washington University - Department of Economics ( email )

Washington, DC
United States

Saint Mary's University, Canada - Sobey School of Business ( email )

Halifax, Nova Scotia
Canada

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