Long-run post-merger stock performance of UK acquiring firms: a stochastic dominance perspective

Abhay Abhyankar, Keng-Yu Ho and Huainan Zhao

Applied Financial Economics, 2005, vol. 15, issue 10, 679-690

Abstract: Using the idea of stochastic dominance, the long-run post-merger stock performance of UK acquiring firms is studied. Performance is compared by using the entire distribution of returns rather than only the mean as in traditional event studies. The main results are as follows: First, it is found that, in general, acquiring firms do not significantly underperform in three years after merger since no evidence of first- or second-order stochastic dominance relation between acquirer and benchmark portfolios is observed. Second, it is found that acquirers paying excessively large premiums are stochastically dominated by their benchmark portfolio implying that overpayment is a possible reason for post-merger underperformance. Consistent with previous studies, it is found that cash financed mergers outperform stock financed ones. Finally, no evidence is observed that glamour acquirers underperform value ones as no stochastic dominance relations between the two. In general, the results underline the importance of examining long-run post-merger stock performance from alternative perspectives.

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09603100500065305 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:apfiec:v:15:y:2005:i:10:p:679-690

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603100500065305

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().