Do long-term shareholders benefit from corporate acquisitions?

Article Abstract:

Using 947 acquisitions during 1970-1989, this article finds a relationship between the postacquisition returns and the mode of acquisition and form of payment. During a five-year period following the acquisition, on average, firms that complete stock mergers earn significantly negatively excess returns of -25.0 percent whereas firms that complete cash tender offers earn significantly positive excess returns of 61.7 percent. Over the combined preacquisition and postacquisition period, target shareholders who hold on to the acquirer stock received as payment in stock mergers do not earn significantly positive excess returns. In the top quartile of target to acquirer size ratio, they earn negative excess returns. (Reprinted by permission of the publisher.)

Acquisitions and mergers, Stockholders

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The operating performance of firms conducting seasoned equity offerings

Article Abstract:

Recent studies have documented that firms conducting seasoned equity offerings have inordinately low stock returns during the five years after the offering, following a sharp run-up in the year prior to the offering. This article documents that the operating performance of issuing firms shows substantial improvement prior to the offering, but then deteriorates. The multiples at the time of the offering, however, do not reflect an expectation of deteriorating performance. Issuing firms are disproportionately high-growth firms, but issuers have much lower subsequent stock returns than nonissuers with the same growth rate. (Reprinted by permission of the publisher.)

Prices and rates, Stocks, Profits, Stock prices, Return on investment, Rate of return, Corporate profits

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