The French Companies and Their Stock Market Performance at the Launch of Corporate Acquisition Programs

Abstract

This paper presents an econometric analysis of the profitability generated at the initiation of the corporates acquisition programs by French investors. These programs generally launched by the firms directors, need to have a high frequency of acquisition attempts, in order to cover fixed costs of the program and generate profits, which they increase the value of the firm and enrich the shareholders. Our empirical study applied on a sample of French companies of various economics branches gives a controversial result. Indeed, the sample of study made up of 46 firms of any size over a period of 11 years from 1997 to 2007, shows that only the hypothesis of the announcement effect was been verified. In the sub-sample of the studied companies, the acquisition programs of two “SMEs” namely Guerbet and Sartorius had a positive value, what proves their financial performance. These results show that the corporate acquisition programs are projects of value-creating investment for French small and medium enterprises. However, generally, for the sample of study, the French companies considered as frequent bidders on French acquisition market indicate clearly that firm’s acquisition programs during the study period were destructive of value. It means they do not maximize the value of the firm nor the stockholder’s wealth.