Wealth Creation In The Recent Merger Boom, The Canadian Evidence

Abstract

We examine the merger announcements of Canadian companies between 1994 and 2000 during an exceptional merger boom. Our results show that both target companies and the acquirer companies obtain significant positive abnormal returns at this time period. However, in the long run, we observe that abnormal returns diminish to become significant and negative for acquiring companies and diminish to be non-significant and positive for target companies. We find acquiring companies to have significantly higher risk that purchase private targets compared with public targets, despite non-significant differences in returns. Our large sample study updates and fills a void in Canadian merger studies during this important and recent time period in merger and acquisitions.