The Post-merger Performance of Acquiring Firms: A Re-examination of an Anomaly

Anup Agrawal, Jeffrey F Jaffe and Gershon Mandelker ()

Journal of Finance, 1992, vol. 47, issue 4, 1605-21

Abstract: The existing literature on the post-merger performance of acquiring firms is divided. The authors reexamine this issue, using a nearly exhaustive sample of mergers between NYSE acquirers and NYSE/AMEX targets. The authors find that stockholders of acquiring firms suffer a statistically significant loss of about 10 percent over the five-year post- merger period, a result robust to various specifications. Their evidence suggests that neither the firm size effect nor beta estimation problems are the cause of the negative post-merger returns. They examine whether this result is caused by a slow adjustment of the market to the merger event. Their results do not seem consistent with this hypothesis. Copyright 1992 by American Finance Association.

Date: 1992
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