IMPACTS OF RELATIVE SIZE AND INDUSTRIAL RELATEDNESS ON RETURNS TO SHAREHOLDERS OF ACQUIRING FIRMS

IMPACTS OF RELATIVE SIZE AND INDUSTRIAL RELATEDNESS ON RETURNS TO SHAREHOLDERS OF ACQUIRING FIRMS The premise of this paper is that in mergers the manageability of acquisitions significantly affects the wealth of shareholders of acquiring firms. Specifically, the relative size of partners as well as the industrial relatedness of the two firms are examined. The test period allows for the determination of announcement, interim, and consummation effects of the mergers on shareholder wealth. It is found that acquisitions of relatively large firms from unrelated industries lead to significant declines in the wealth of shareholders of acquiring firms, and that this result is most pronounced when the period is extended beyond the announcement through the effective dates. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Financial Research Wiley

IMPACTS OF RELATIVE SIZE AND INDUSTRIAL RELATEDNESS ON RETURNS TO SHAREHOLDERS OF ACQUIRING FIRMS

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Abstract

The premise of this paper is that in mergers the manageability of acquisitions significantly affects the wealth of shareholders of acquiring firms. Specifically, the relative size of partners as well as the industrial relatedness of the two firms are examined. The test period allows for the determination of announcement, interim, and consummation effects of the mergers on shareholder wealth. It is found that acquisitions of relatively large firms from unrelated industries lead to significant declines in the wealth of shareholders of acquiring firms, and that this result is most pronounced when the period is extended beyond the announcement through the effective dates.

Journal

The Journal of Financial ResearchWiley

Published: Jun 1, 1989

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