Winning by Losing: Evidence on the Long-run Effects of Mergers

Ulrike Malmendier, Enrico Moretti and Florian S Peters

The Review of Financial Studies, 2018, vol. 31, issue 8, 3212-3264

Abstract: We propose a novel approach for measuring returns to mergers. In a new data set of close bidding contests, we use losers’ post-merger performance to construct the counterfactual performance of winners had they not won the contest. Stock returns of winners and losers closely track each other over the 36 months before the merger, corroborating our identification approach. Bidders are also very similar in terms of Tobins q, profitability, and other accounting measures. Over the 3 years after the merger, however, losers outperform winners by 24%. Commonly used methodologies, such as announcement returns, fail to identify acquirer underperformance. Received October 31, 2016; editorial decision October 29, 2017 by Editor Francesca Cornelli.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (43)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhy009 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Winning by Losing: Evidence on the Long-Run Effects of Mergers (2018)
Working Paper: Winning by Losing: Evidence on the Long-Run Effects of Mergers (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:31:y:2018:i:8:p:3212-3264.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().