Evidence of Excess Comovement in US Mergers

Per Östberg and Christoph Wenk
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Per Östberg: University of Zurich, Ecole Polytechnique Fédérale de Lausanne, and Swiss Finance Institute
Christoph Wenk: University of Zurich

No 12-33, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

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 (search for similar items in EconPapers)
JEL-codes: G02 G12 G34 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2012-11
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1233

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