Journal article
Market Valuation and Acquisition Quality: Empirical Evidence
The Review of financial studies, Vol.22(2), pp.633-679
02/01/2009
DOI: 10.1093/rfs/hhm073
Abstract
Existing research shows that significantly more acquisitions occur when stock markets are booming than when markets are depressed. Rhodes-Kropf and Viswanathan (2004) hypothesize that firm-specific and market-wide valuations lead to an excess of mergers, and these will be value destroying. This article investigates whether acquisitions occurring during booming markets are fundamentally different from those occurring during depressed markets. We find that acquirers buying during high-valuation markets have significantly higher announcement returns but lower long-run abnormal stock and operating performance than those buying during low-valuation markets. We investigate possible explanations for the long-run underperformance and conclude it is consistent with managerial herding.
Details
- Title: Subtitle
- Market Valuation and Acquisition Quality: Empirical Evidence
- Creators
- Christa H. S. Bouwman - Case Western Reserve UniversityKathleen Fuller - University of MississippiAmrita S. Nain - McGill University
- Resource Type
- Journal article
- Publication Details
- The Review of financial studies, Vol.22(2), pp.633-679
- Publisher
- Oxford Univ Press
- DOI
- 10.1093/rfs/hhm073
- ISSN
- 0893-9454
- eISSN
- 1465-7368
- Number of pages
- 47
- Grant note
- Institut de Finance Mathematique de Montreal
- Language
- English
- Date published
- 02/01/2009
- Academic Unit
- Finance
- Record Identifier
- 9984380388502771
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