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EFFECT OF MERGERS ON THE SHARE PRICE MOVEMENT OF THE ACQUIRING FIRMS: A UK STUDY
Author(s) -
Dodds J.C.,
Quek J.P.
Publication year - 1985
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1985.tb00785.x
Subject(s) - mergers and acquisitions , profitability index , equity (law) , monetary economics , cash , sample (material) , dispersion (optics) , business , share price , economics , accounting , finance , stock exchange , chemistry , physics , optics , chromatography , political science , law
The profitability of mergers in Britain has not received the same attention as in the USA. This study examines mergers for the UK industrial sector as a whole for a period (1974–76) when merger activity was relatively slack. A standard methodology is used, but the size effects and the activeness of acquirors as well as the financing of the acquisition are examined. The conclusions contradict to some extent those found by other researchers in that the evidence was inconsis‐ tent with the Efficient Markets Hypothesis. The effect of taking firm size into account was found to reduce the standard deviations of the sample and it would appear that the cash mergers were viewed as less desirable by the market com‐ pared to equity exchange. For the separation of merger activehon active firms it was found that there was less dispersion of the residuals for non‐merger active firms.