Market Valuation and Acquisition Quality: Empirical Evidence
Existing research shows that significantly more acquisitions occur when stock markets are booming than when markets are depressed. Rhodes-Kropf and Viswanathan (2004) hypothesize that firm-specific and market-wide (mis-)valuations lead to an excess of mergers, and these will be value destroying. Thi...
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| Veröffentlicht in: | The Review of financial studies 2009-02, Vol.22 (2), p.633-679 |
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| container_title | The Review of financial studies |
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| creator | Bouwman, Christa H. S. Fuller, Kathleen Nain, Amrita S. |
| description | Existing research shows that significantly more acquisitions occur when stock markets are booming than when markets are depressed. Rhodes-Kropf and Viswanathan (2004) hypothesize that firm-specific and market-wide (mis-)valuations lead to an excess of mergers, and these will be value destroying. This article investigates whether acquisitions occurring during booming markets are fundamentally different from those occurring during depressed markets. We find that acquirers buying during high-valuation markets have significantly higher announcement returns but lower long-run abnormal stock and operating performance than those buying during low-valuation markets. We investigate possible explanations for the long-run underperformance and conclude it is consistent with managerial herding. |
| doi_str_mv | 10.1093/rfs/hhm073 |
| format | Article |
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We investigate possible explanations for the long-run underperformance and conclude it is consistent with managerial herding.</description><subject>Abnormal returns</subject><subject>Acquisitions</subject><subject>Acquisitions & mergers</subject><subject>Bear markets</subject><subject>Bids</subject><subject>Business strategies</subject><subject>Cash</subject><subject>Corporate mergers</subject><subject>Economic activity</subject><subject>Economic conditions</subject><subject>Economic models</subject><subject>Economic theory</subject><subject>Financial portfolios</subject><subject>Financing methods</subject><subject>Herding</subject><subject>Industrial market</subject><subject>Market value</subject><subject>Mergers</subject><subject>Price earnings ratio</subject><subject>Prices</subject><subject>Purchasing</subject><subject>School finance</subject><subject>Securities markets</subject><subject>Seminars</subject><subject>Stock exchanges</subject><subject>Stock prices</subject><subject>Stockholders</subject><subject>Studies</subject><subject>Target acquisitions</subject><subject>Tender offers</subject><subject>Valuation</subject><issn>0893-9454</issn><issn>1465-7368</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2009</creationdate><recordtype>article</recordtype><recordid>eNp90E1LxDAQBuAgCq6rF-9CEfQg1J1kmjYVL8uyfsCKCOo1pGnDZu2XSSvsv7da8eDB0zDwMLzzEnJM4ZJCijNn_Gy9riDBHTKhUczDBGOxSyYgUgzTiEf75MD7DQBQjGBCrh-Ueyu64FWVvepsUweqzoO5fu-tt9_7U69K222vgmXVWme1KoPlh82LWheHZM-o0hdHP3NKXm6Wz4u7cPV4e7-Yr0IdxWkXohiypYZpiDKRC8pZnFGaK0wEcgaMCsMNo5nKMTWUGwOokpxnWsQMaEZxSs7Hu61r3vvCd7KyXhdlqeqi6b3EBFJBkQ_w9A_cNL2rh2yS4fByGgMO6GJE2jXeu8LI1tlKua2kIL9alEOLcmxxwGcjbvr2f3cyuo3vGvcrERiLARh-AlFMekk</recordid><startdate>20090201</startdate><enddate>20090201</enddate><creator>Bouwman, Christa H. 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S.</creatorcontrib><creatorcontrib>Fuller, Kathleen</creatorcontrib><creatorcontrib>Nain, Amrita S.</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>The Review of financial studies</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Bouwman, Christa H. 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| fulltext | fulltext |
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| ispartof | The Review of financial studies, 2009-02, Vol.22 (2), p.633-679 |
| issn | 0893-9454 1465-7368 |
| language | eng |
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| source | Jstor Complete Legacy; Oxford University Press Journals All Titles (1996-Current); EBSCOhost Business Source Complete |
| subjects | Abnormal returns Acquisitions Acquisitions & mergers Bear markets Bids Business strategies Cash Corporate mergers Economic activity Economic conditions Economic models Economic theory Financial portfolios Financing methods Herding Industrial market Market value Mergers Price earnings ratio Prices Purchasing School finance Securities markets Seminars Stock exchanges Stock prices Stockholders Studies Target acquisitions Tender offers Valuation |
| title | Market Valuation and Acquisition Quality: Empirical Evidence |
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