INDUSTRY PROSPECTS AND ACQUIRER RETURNS IN DIVERSIFYING TAKEOVERS

Husayn Shahrur and Anand Venkateswaran

Journal of Financial Research, 2009, vol. 32, issue 1, 23-51

Abstract: We use a sample of 816 diversifying takeovers from 1978 to 2003 to examine whether takeover announcements release negative information about the future prospects of the acquirer's main industry. We find that rivals that are most similar to the acquirer (homogeneous rivals) experience significant negative cumulative abnormal returns (CAR) around takeover announcements. Takeovers that result in negative wealth effects to acquirers are associated with negative abnormal revisions in analysts' forecasts of homogeneous rivals' earnings per share. We also find a decline in the posttakeover operating performance of rival firms. The decline is especially pronounced for homogeneous rivals and for takeovers with negative wealth effects to acquirers. Our findings imply that CAR‐based estimates of acquirer wealth gains from takeovers that do not account for industrywide information releases are significantly biased downward.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1111/j.1475-6803.2008.01241.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:32:y:2009:i:1:p:23-51

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-2592

Access Statistics for this article

Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().