Corporate Takeovers, Strategic Objectives, and Acquiring-Firm Shareholder Wealth

Financial Management, Vol. 29, Iss. 1, Spring 2000

Posted: 5 Sep 2001

See all articles by M. Mark Walker

M. Mark Walker

University of Mississippi - Department of Finance

Abstract

I investigate the strategic objectives and stock price performance of acquiring firms. The results support both the asymmetric information hypothesis (acquiring-firm shareholders earn higher returns following cash offers) and also the strategic alignment hypothesis (acquiring-firm shareholders earn higher returns following takeovers that expand the firm's operations geographically or increase its market share). Further analysis shows that shareholder losses are limited primarily to those takeovers based on diversification strategies, when the acquiring firm cites potential overlap with its existing operations. The latter firms tend to have more favorable growth opportunities prior to the takeover announcement.

JEL Classification: G34, L21

Suggested Citation

Walker, Milan Mark, Corporate Takeovers, Strategic Objectives, and Acquiring-Firm Shareholder Wealth. Financial Management, Vol. 29, Iss. 1, Spring 2000, Available at SSRN: https://ssrn.com/abstract=267720

Milan Mark Walker (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-7721 (Phone)
662-915-5821 (Fax)

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