Abstract
The paper re-examines the short-term and long-term performance following announcements of mergers and acquisitions. This is the first study that comprehensively explores this phenomenon in Central and Eastern European countries. We find strong evidence that announcement of a takeover creates value for both bidders and acquirers in the short run. Simultaneously, contrary to the stylized fact reported by a majority of U.S. based studies, after controlling for local value, size, and momentum factors the mergers and acquisitions do not destroy the value of the acquirers in the long term. The observations are important for corporate governance and portfolio management. The research is based on 109 deals in years 2001–2014. For the short-horizon event studies, we calculate average cumulative abnormal returns and we employ of the zero, index, and market models. For the long-run studies, we build equally and capitalization-weighted calendar-time portfolios and test their performances with CAPM, three-factor and four-factor models.
Highlights
Nowadays, the global business environment requires from its participants to constantly look for growth opportunities
After computing daily ARs based on expected return models, we proceeded with timeseries aggregation, so as to obtain cumulative abnormal returns (CARs): T
Our results show that the positive abnormal returns are decreasing while extending the time window
Summary
The global business environment requires from its participants to constantly look for growth opportunities. Stafford (2012) noticed that scores of studies discussing the M&A influence on post-transaction stock performance relate to short-term effects, immediately surrounding announcement dates, while a substantially more limited number of studies examine the long-run post acquisition returns. The reason of such phenomenon may be explained by Agrawal et al (1992) and Andrade et al (2001), who claim that such approach assumes market efficiency and ability to digest almost immediately the full impact of the acquisition.
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