22 Pages Posted: 4 Jun 2007
We examine the relation between divergence of opinion about the value of the acquiring firm in the pre-acquisition announcement period and post-acquisition stock returns. We find that acquirers subject to high opinion dispersion earn lower future returns than acquirers subject to low dispersion. It appears that, on average, only acquirers in the high divergence of opinion subset experience significant negative post-event abnormal returns. In the spirit of Miller (1977), such evidence implies that high pre-event investor disagreement leads to systematic overpricing of acquirers that manifests itself through long-run underperformance of their stock. The documented misvaluation persists irrespective of the opinion divergence proxy and performance evaluation method used and after controlling for several common deal and acquirer characteristics.
JEL Classification: G24, G31, G34, G14
Suggested Citation: Suggested Citation
Alexandridis, George and Antoniou, Antonios and Petmezas, Dimitris, Divergence of Opinion and Post-Acquisition Performance. Journal of Business Finance & Accounting, Vol. 34, No. 3-4, pp. 439-460, April/May 2007. Available at SSRN: https://ssrn.com/abstract=990920 or http://dx.doi.org/10.1111/j.1468-5957.2007.02043.x
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