Working Paper: NBER ID: w9523
Authors: Sara B. Moeller; Frederik P. Schlingemann; Ren M. Stulz
Abstract: We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained $8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.
Keywords: No keywords provided
JEL Codes: G31; G32; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Acquisition announcements (G34) | Negative shareholder returns (G35) |
| Firm size (L25) | Direction of shareholder gains or losses (G35) |
| Firm size (L25) | Magnitude of abnormal returns (C22) |
| Type of acquisition (G34) | Shareholder outcomes (G34) |