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Impact of SOX on the returns to targets and acquirers in corporate tender offers

Harjeet S. Bhabra and Ashrafee T. Hossain

The North American Journal of Economics and Finance, 2017, vol. 42, issue C, 1-19

Abstract: We argue that, following the sweeping reforms introduced by the Sarbanes-Oxley Act (SOX), managers of bidding firms have become more strategic in choosing acquisition targets in inter-firm tender offers. Using a large sample of tender offers between 1996 and 2009, we report that the proportion of synergy-driven value-maximizing acquisitions increased following the passage of SOX. Targets experience lower pre-bid share price run-up, receive larger deal premiums, and have larger announcement period abnormal returns after SOX. Acquiring firm shareholders also experience significant wealth gains around the announcement in the post-SOX period. Employing industry and matched firm portfolios, we also document that both the operating performance and buy-and-hold abnormal returns over the three- and five-year post-acquisition period improved significantly after SOX. Overall, our evidence shows that SOX had a positive influence in the market for inter-firm tender offers.

Keywords: Regulations; SOX; Insider trades; Acquisitions; Tender offers (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecofin:v:42:y:2017:i:c:p:1-19