Do shareholders of acquiring firms gain from acquisitions?

Sara B. Moeller, Frederik P. Schlingemann and René M. Stulz

No 9523, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained $8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.

JEL-codes: G31 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
Date: 2003-03
Note: AP CF
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