Performance of Stock Market Driven Acquisitions

Do managers time the stock market in making
takeovers? This dissertation examines the theory of
stock market driven acquisitions in explaining
performance of mergers and acquisitions. Examining
stock returns and financial performance, the
predictions of this theory are tested on a sample of
Canadian firms (1994-2000).
Findings show that Canadian acquirers using stock
deals suffer significant negative 36-month
performance measured by a market model, a market
adjusted model and an accounting return model. These
findings support the theory s prediction of negative
returns. Weak support is found for the prediction of
positive returns for cash acquirers. There is support
for the theory s prediction of better returns for
cash acquirers than stock acquirers. Target companies
experience post-merger gains that last in the short
term as predicted. Over-valuation of acquirers using
stock payment does suffer negative long term
performance. Poorer performance is not found in
overvaluation of cash acquirers. Overall, this study
concludes from a range of evidence in Canada that
indeed managers could be motivated by overvalued
stock prices in making takeovers.

Autorentext

Alex Ng is an Assistant Finance Professor at University ofNorthern British Columbia, Canada. He has a Doctorate in BusinessAdministration from Nova Southeastern University, Florida. Hisresearch expertise is in mergers and acquisitions and initialpublic offerings. Alex published in several finance journals andreceived national research grants.

Klappentext

Do managers time the stock market in makingtakeovers? This dissertation examines the theory ofstock market driven acquisitions in explainingperformance of mergers and acquisitions. Examiningstock returns and financial performance, thepredictions of this theory are tested on a sample ofCanadian firms (1994-2000). Findings show that Canadian acquirers using stockdeals suffer significant negative 36-monthperformance measured by a market model, a marketadjusted model and an accounting return model. Thesefindings support the theory's prediction of negativereturns. Weak support is found for the prediction ofpositive returns for cash acquirers. There is supportfor the theory's prediction of better returns forcash acquirers than stock acquirers. Target companiesexperience post-merger gains that last in the shortterm as predicted. Over-valuation of acquirers usingstock payment does suffer negative long termperformance. Poorer performance is not found inovervaluation of cash acquirers. Overall, this studyconcludes from a range of evidence in Canada thatindeed managers could be motivated by overvaluedstock prices in making takeovers.