Evidence of Excess Comovement in US Mergers
47 Pages Posted: 16 Nov 2012
Date Written: June 6, 2012
Abstract
This paper considers changes in market comovement of merging US firms. Comparing the expected to the actual post merger comovement, we find that the post merger beta exhibits excess comovement with the acquiring firm. This suggests that the firm’s comovement is at least partly determined by its investors. We find that the excess comovement is significantly greater in cash transactions, when target shareholders tender their entire stake, than in pure stock transactions. Additionally, we document that the excess comovement is greater when the target is included in the S&P 500 as a result of the merger.
Keywords: Mergers, Comovement, Segmentation, Method of Payment, Index Inclusion
JEL Classification: G34, G12, G02
Suggested Citation: Suggested Citation
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