The effect of a stock-based M&A deal on the acquiring firm’s value during hot markets
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2020-09-08
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en
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Abstract
This study examines the effect of stock-based M&A deals during a hot market period on the performance of the acquiring firm, compared to stock-based M&A deals that did not occur in a hot market period. The performance of the acquiring firm is measured with the cumulative abnormal returns. To determine whether a hot market is apparent, the method of Tebourbi (2012) is used. A hot market is operationalized by retrieving the highest quartile of the used stock market index, and it must hold it for at least three consecutive months. The sample of the study is based upon European firms, since little research has been done with respect to this research problem for European firms. Prior research, based upon US data, showed that in the short run, deals made in a hot market period outperform the deals made in other periods, but mixed results have been concluded for the long run. The results of this study are in line with the US-based studies, with respect to the short run. However, there is not enough evidence to provide an answer for a long-term effect on this research problem in this study.
Key words: Mergers & Acquisitions, market timing differences, European perspective, abnormal returns.
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Faculteit der Managementwetenschappen