Is Hostility in the Merger and Acquisition Market Wasteful? Empirical Evidence of the Economic Costs of Hostility

Journal of Business and Securities Law, Vol. 7, Nos. 1-2, pp 9-49

Posted: 23 Mar 2006 Last revised: 24 Nov 2008

Sema Dube

Yeditepe University

John L. Glascock

University of Connecticut; European Business School

Mark Klock

Independent

Date Written: 2007

Abstract

The question as to whether hostility is economically wasteful has been subject to intense debate for decades in the literature of law, economics, and finance. Typically the debate is focused in the issue of managerial entrenchment. Commentators frequently adopt an unstated presumption that hostility is wasteful per se. We argue that it is important to examine empirical data before accepting this premise. We investigate long-term, post-acquisition measures of corporate operating performance of hostile acquisitions relative to non-hostile acquisitions. Our results suggest that hostility does not affect operating performance, and from this we infer that there are no economic costs associated with hostility. The findings are robust with respect to a variety of methodologies and control variables.

Keywords: hostility, acquisition, cash flow, performance

JEL Classification: G3, K2

Suggested Citation

Dube, Sema and Glascock, John L. and Klock, Mark, Is Hostility in the Merger and Acquisition Market Wasteful? Empirical Evidence of the Economic Costs of Hostility (2007). Journal of Business and Securities Law, Vol. 7, Nos. 1-2, pp 9-49. Available at SSRN: https://ssrn.com/abstract=893046

Sema Dube

Yeditepe University ( email )

81120 Kayisdagi, Istanbul
Turkey

John L. Glascock

University of Connecticut ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

European Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

Mark S. Klock (Contact Author)

Independent

No Address Available

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