Bidder Returns on Acquisition Announcements: The Case of Instantly Completed Deals

16 Pages Posted: 8 Jul 2015 Last revised: 5 May 2017

See all articles by Sudip Ghosh

Sudip Ghosh

Pennsylvania State University

Christine Harrington

Central Connecticut State University

Christopher J. Marquette

Central Connecticut State University

Thomas G. E. Williams

Fayetteville State University - School of Business and Economics

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Date Written: July 7, 2015

Abstract

Previous research on acquisitions has found announcement returns for acquirers to be affected by a number of factors; most prominent being the size of the acquirer, the method of payment and type of ownership of the target. Acquisitions by small acquirers, cash deals and deals for private targets yield better returns than large acquirers, equity deals, and public targets respectively. However, these studies are based on announcements returns where there is still uncertainty as to whether the transaction will be completed. Therefore those returns may have been attenuated by market perception of the likelihood of completion of the deals. To remove the effects of uncertainty surrounding the completion, we use the subset of deals that are announced and completed on the same day. We find that the small firm effect persists, but that the effects of method of payment and type of ownership of the target disappear. These results are consistent with the conjecture that the market does not necessarily perceive cash deals and deals for private targets to be better than their equity and public target counterparts, but rather that they are more likely to be completed.

Keywords: Acquisitions

Suggested Citation

Ghosh, Sudip and Harrington, Christine and Marquette, Christopher J. and Williams, Thomas G. E., Bidder Returns on Acquisition Announcements: The Case of Instantly Completed Deals (July 7, 2015). Available at SSRN: https://ssrn.com/abstract=2627716 or http://dx.doi.org/10.2139/ssrn.2627716

Sudip Ghosh (Contact Author)

Pennsylvania State University ( email )

Berks Campus
Reading, PA 19610
United States

Christine Harrington

Central Connecticut State University ( email )

1615 Stanley Street
New Britian, CT 06050
United States

Christopher J. Marquette

Central Connecticut State University ( email )

1615 Stanley Street
New Britian, CT 06050
United States
860-832-3221 (Phone)

Thomas G. E. Williams

Fayetteville State University - School of Business and Economics ( email )

1200 Murchison Road
Fayetteville, NC 28301
United States
910 672 1736 (Phone)
910 672 2065 (Fax)

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