Returns to acquirers of public and subsidiary targets

Jeffrey Jaffe; Jan Jindra; David Pedersen; Torben Voetmann

doi:https://doi.org/10.1016/j.jcorpfin.2015.02.005

Returns to acquirers of public and subsidiary targets

Jeffrey Jaffe, Jan Jindra, David Pedersen, Torben Voetmann

Camden School of Business

Rutgers, The State University

Research output: Contribution to journal › Article › peer-review

13 Scopus citations

Abstract

Prior research documents that acquirers of public targets earn zero or negative announcement period returns, while acquirers of private and subsidiary targets earn positive returns. This finding is clearly important to managers and stockholders of acquirers and targets. We employ a large sample of public and subsidiary targets to test four previously unexamined theories of the return differential: synergy, target financial liquidity, target valuation uncertainty, and target bid resistance. We find that none of the empirical measures related to these four theories explains the return differential. This is surprising, since the theories have generally found empirical support in other financial areas.

Original language	American English
Pages (from-to)	246-270
Number of pages	25
Journal	Journal of Corporate Finance
Volume	31
DOIs	https://doi.org/10.1016/j.jcorpfin.2015.02.005
State	Published - Apr 1 2015

ASJC Scopus subject areas

Business and International Management
Finance
Economics and Econometrics
Strategy and Management

Keywords

Acquirer CAR
G3
Public target
Subsidiary sale

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https://doi.org/10.1016/j.jcorpfin.2015.02.005

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title = "Returns to acquirers of public and subsidiary targets",

abstract = "Prior research documents that acquirers of public targets earn zero or negative announcement period returns, while acquirers of private and subsidiary targets earn positive returns. This finding is clearly important to managers and stockholders of acquirers and targets. We employ a large sample of public and subsidiary targets to test four previously unexamined theories of the return differential: synergy, target financial liquidity, target valuation uncertainty, and target bid resistance. We find that none of the empirical measures related to these four theories explains the return differential. This is surprising, since the theories have generally found empirical support in other financial areas.",

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author = "Jeffrey Jaffe and Jan Jindra and David Pedersen and Torben Voetmann",

note = "Funding Information: David Pedersen acknowledges partial financial support from the David Whitcomb Center for Research in Financial Services of Rutgers University. Publisher Copyright: {\textcopyright} 2015.",

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T1 - Returns to acquirers of public and subsidiary targets

AU - Jaffe, Jeffrey

AU - Jindra, Jan

AU - Pedersen, David

AU - Voetmann, Torben

PY - 2015/4/1

Y1 - 2015/4/1

N2 - Prior research documents that acquirers of public targets earn zero or negative announcement period returns, while acquirers of private and subsidiary targets earn positive returns. This finding is clearly important to managers and stockholders of acquirers and targets. We employ a large sample of public and subsidiary targets to test four previously unexamined theories of the return differential: synergy, target financial liquidity, target valuation uncertainty, and target bid resistance. We find that none of the empirical measures related to these four theories explains the return differential. This is surprising, since the theories have generally found empirical support in other financial areas.

AB - Prior research documents that acquirers of public targets earn zero or negative announcement period returns, while acquirers of private and subsidiary targets earn positive returns. This finding is clearly important to managers and stockholders of acquirers and targets. We employ a large sample of public and subsidiary targets to test four previously unexamined theories of the return differential: synergy, target financial liquidity, target valuation uncertainty, and target bid resistance. We find that none of the empirical measures related to these four theories explains the return differential. This is surprising, since the theories have generally found empirical support in other financial areas.

KW - Acquirer CAR

KW - G3

KW - Public target

KW - Subsidiary sale

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DO - https://doi.org/10.1016/j.jcorpfin.2015.02.005

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VL - 31

SP - 246

EP - 270

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

ER -

Returns to acquirers of public and subsidiary targets

Abstract

ASJC Scopus subject areas

Keywords

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