Wealth Effects of Acquiring Financially Distressed Firms

Dana J Johnson and Ashok Abbott

The Financial Review, 1991, vol. 26, issue 3, 275-302

Abstract: The purpose of the present research is to study target and acquirer shareholder wealth effects of acquisition announcements in which the target is financially distressed. The abnormal returns and the dollar abnormal gains to both the target and acquiring firms are examined according to whether the model of acquisition is a merger or a tender offer. A regression analysis is also undertaken to examine the importance of the model of acquisition, an industry effect, and tax variables in determining the abnormal collar gains in acquisitions of financially distressed targets. Copyright 1991 by MIT Press.

Date: 1991
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