Can acquisitions change firms'

Abstract

This study re-investigates whether firms experience systematic risk changes due to acquisitions by examining changes in pre- and post-acquisition Betas. The study extends findings of prior studies by examining high-tech and basic-tech acquisitions separately and by examining whether acquirers' and targets' acquisition and alliance experience influence changes in risk due to acquisition announcements. Beta is a measure of market-specific risk and indicates the degree of variation in the stock systematically attributable to changes in market conditions. Beta characterizes a stock's usual relationship with the market. The study uses robust regression techniques and finds that Betas decrease following acquisition announcements supporting the findings of some prior studies. The study finds that changes in Beta are quite different for high-tech and basic-tech acquisitions, and that acquirers' and targets' alliance and acquisition experience influences changes in Beta.