| Popis: |
It is problematic to use announcement returns to assess the gains to acquiring-firm shareholders since the announcement of a bid usually conveys more information than the synergy from combination. Using a unique, hand-collected dataset on exogenous failed takeovers, I investigate termination returns after controlling for much of the information about the bidder's valuation. I find that bidder returns at the announcement of deal cancellation are on average insignificantly different from zero. However, this finding masks considerable variation in the market reaction to different types of deals. In particular, I find that bidders returns are significantly negative when a deal is canceled and the target is a private firm or a subsidiary of either a public or private firm, which is consistent with other evidence suggesting that bidders fare well when acquiring relatively illiquid assets. I further provide evidence to support the hypothesis that private sellers are willing to sell for a lower price because of elevated financial constraints. For acquisitions of entire public firms, I find that cancellation announcement returns are on average significantly positive, which suggests that agency problems at the firm level can generate a bias towards unprofitable growth, at least in the merger arena. I also find that some variations recorded in announcement returns (e.g. lower returns for equity offers) merely reflect the difference in revelation of the bidder's stand-alone value. In addition, I find a role for target size in bidder returns, a finding that is consistent with recent concerns for mergers of equals. The results holds after controlling for various firm and bid characteristics and is robust to a variety of specification choices. |
