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Serial acquirers and decreasing returns: Do bidders’ acquisition patterns matter?
Author(s) -
Morillon Thibaut G.
Publication year - 2021
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12253
Subject(s) - business , monetary economics , agency (philosophy) , control (management) , agency cost , contrast (vision) , economics , finance , shareholder , corporate governance , computer science , philosophy , management , epistemology , artificial intelligence
This paper examines the phenomenon of declining announcement returns of serial acquirers. Using a classification of acquirers based on their patterns of acquisition, I find that decreasing returns occur mostly within “blocks” of acquisitions. This trend is driven by bidders who acquire targets quickly in chunks. In contrast, I find no evidence of any such decline in returns for the most active acquirers in the market of corporate control. I test several theories proposed by the prior literature to explain declining returns and find evidence consistent with temporary overvaluation, agency costs, and bidder learning as likely drivers.