Market Returns to Acquirers of Substantial Assets

Raymond da Silva Rosa, Thuy Nguyen and Terry Walter ()
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Raymond da Silva Rosa: UWA Business School, University of Western Australia, 35 Stirling Highway, Nedlands, WA 6009.
Thuy Nguyen: Macquarie Bank, 20 Bond St, Sydney, NSW, 2000.

Australian Journal of Management, 2004, vol. 29, issue 1_suppl, 111-133

Abstract: Does poor post-acquisition performance characterise firms that make non-M&A acquisitions? We investigate the wealth effects of substantial asset acquisitions (i.e. acquisitions that cost over $10 million) on acquiring firms' shareholders. We find significant abnormal positive market reaction to asset acquisition announcements and contrary to findings for firms undertaking M&As, the acquiring firms perform exceptionally well post-acquisition. Our findings are robust to the research method weaknesses common to many studies of long-term performance and we control for free-cash-flow as well. Our results contradict the hubris hypothesis of acquisitions and lend weight to the argument that the auction-style process that characterizes corporate takeover bids contributes to overpayment.

Keywords: ASSET ACQUISITIONS; MARKET EFFICIENCY; LONG-TERM PERFORMANCE (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:29:y:2004:i:1_suppl:p:111-133

DOI: 10.1177/031289620402901S05

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