Abstract
The aim of this paper is to provide fresh-out of sample evidence on short-term and long-term performance following announcement of mergers and acquisitions. The research is based on 109 M&A deals in Central and Eastern European countries for years 2001-2014. For the short-horizon event studies, we use ACAR approach, and measure abnormal returns with zero, index and market models. For the long-run studies, we build equally and value weighted calendar portfolios and test their performances with CAPM, three-factor and four-factor models. We document positive and significant short-term abnormal returns on acquiring and target companies in the first weeks following the transaction announcement. Second, we find long-run non-significant negative abnormal returns of acquiring companies.
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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