Merger drivers and the change of bidder shareholders' wealth

Sheng-Yung Yang (), Lin Lin, De-Wai Chou and Hsiao-Chen Cheng

The Service Industries Journal, 2008, vol. 30, issue 6, 851-871

Abstract: A growing number of merger studies concern the causality of firm performance and merger activity in the last decade, but with mixed results. Assuming semi-strong efficiency, this article argues that firms with good stock performance are more likely to acquire other firms. With 412 US-listed bidders, results from the event study method clearly support our hypothesis by showing a strong upward movement of cumulative abnormal returns across groups in the pre-merger period. Results also suggest that bidders of different characteristics have different preference for payment methods and thus the market reactions to them are different, despite the noise that frequently accompanies merger activity. These empirical outcomes are important to both investors and financial services companies including investment banks when knowledge about the market reactions to their clients in mergers is required.

Date: 2008
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DOI: 10.1080/02642060801911110

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The Service Industries Journal is currently edited by Eileen Bridges, Professor Domingo Ribeiro, Ronald Goldsmith, Barry Howcroft and Youjae Yi

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