Do Shareholders of Acquiring Firms Gain from Acquisitions?
NBER WORKING PAPER SERIES
DO SHAREHOLDERS OF ACQUIRING FIRMS GAIN FROM ACQUISITIONS? Sara B. Moeller Frederik P. Schlingemann René M. Stulz Working Paper 9523 http://www.nber.org/papers/w9523 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 February 2003
We are grateful to Harry DeAngelo and Ralph Walkling for useful comments. The views expressed herein are those of the author and not necessarily those of the National Bureau of Economic Research. ©2003 by Sara B. Moeller, Frederik P. Schlingemann, and René M. Stulz. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including ©notice, is given to the source.
Do Shareholders of acquiring firms gain from acquisitions? Sara B. Moeller, Frederik P. Schlingemann, and René M. Stulz NBER Working Paper No. 9523 February 2003 JEL No. G31, G32, G34 ABSTRACT We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained $8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.
Sara B. Moeller Department of Finance Cox School of Business Southern Methodist University smoeller@mail.cox.smu.edu René M. Stulz Fisher College of Business Ohio State University
DO SHAREHOLDERS OF ACQUIRING FIRMS GAIN FROM ACQUISITIONS? Sara B. Moeller Frederik P. Schlingemann René M. Stulz Working Paper 9523 http://www.nber.org/papers/w9523 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 February 2003
We are grateful to Harry DeAngelo and Ralph Walkling for useful comments. The views expressed herein are those of the author and not necessarily those of the National Bureau of Economic Research. ©2003 by Sara B. Moeller, Frederik P. Schlingemann, and René M. Stulz. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including ©notice, is given to the source.
Do Shareholders of acquiring firms gain from acquisitions? Sara B. Moeller, Frederik P. Schlingemann, and René M. Stulz NBER Working Paper No. 9523 February 2003 JEL No. G31, G32, G34 ABSTRACT We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained $8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.
Sara B. Moeller Department of Finance Cox School of Business Southern Methodist University smoeller@mail.cox.smu.edu René M. Stulz Fisher College of Business Ohio State University
References: 26 Wruck, K.H., 1989, Equity ownership concentration and firm value: Evidence from private equity financings, Journal of Financial Economics 23, 3-28