The Importance of the Bidder Motive in the Wealth Effect of Takeovers

L'impact des offres publiques sur la richesse des actionnaires: une étude des anticipations des agents selon le motif du rachat

Constance Phelizon
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Constance Phelizon: TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: Event studies on shareholder wealth effects of American and French takeovers find out that targets clearly gain, and bidders do not lose. We estimate in this study the abnormal returns associated with takeovers in the French market during the period of intense acquisition activity of 1991-1997. We find out the classic result that takeovers contribute to an increase in the target expected profitability but yields no short-term profits for the bidder. We improve these finfings further by testing the hypotheses of the literature accounting for wealth creation associated with takeovers. We put ahead the importance of the bidder motive for the target expected value. Actually, operations that were not industrially justified by the development of the bidder activity, either by the expansion of its productive capacity or by its vertical integration, were found to generate non-significant abnormal returns. These findings seem to support the synergy hypothesis. Nevertheless we do not solve the bidder enigma, as long as industrially justified takeover abnormal returns remain unsignificant for this subsample.

Keywords: Takeovers; Industrial Synergies; Event Study Methodology; OPA; OPE; synergies industrielles; études d'événements (search for similar items in EconPapers)
Date: 2000-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03774133
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Published in 2000

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