6533b872fe1ef96bd12d3aee

RESEARCH PRODUCT

Market valuation and acquiring firm performance in the short and long term: Out-of-sample evidence from Spain

Begoña HerreroMiguel Angel Latorre GuillemJosé Emilio Farinós

subject

Market sentimentEconomics and EconometricsFirm acquisitionStrategy and ManagementHigh valuationMonetary economicsUnderreactionddc:6500502 economics and businessG34050207 economicsBusiness and International ManagementMarket sentimentMarket valueValuation (finance)050208 financeG1405 social sciencesL33Market reactionGeneral MedicineGeneral Business Management and AccountingD81Out of sample050211 marketingManagerial overconfidenceBusinessMarket valuation050203 business & management

description

We investigate bidder’s short- and long-term performance in periods of high and low valuation market in response to announcements of acquisitions carried out by Spanish listed firms over the period 1991–2016. We find that acquirers of unlisted targets fully react at the announcement date in high valuation periods, meanwhile the underreaction of listed target bidders at the moment of the announcement in low valuation markets is the result of return continuations. In addition, we find that the market reaction do not depend on recent merger history. Therefore, we provide evidence that bidder reaction to acquisitions is not consistent with the predictions of market sentiment (optimism) after controlling for the listing status of the target firm, not supporting, for a thinner market as the Spanish one, the evidence observed in US and UK markets. JEL CLASSIFICATION G14; G34; L33; D81

yearjournalcountryeditionlanguage
2019-02-01BRQ Business Research Quarterly
https://doi.org/10.1016/j.brq.2019.01.001