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STOCKHOLDER RETURNS AMONG HOMOGENEOUS GROUPS OF MERGERS
Author(s) -
Sawyer Granville M.,
Shrieves Ronald E.
Publication year - 1994
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1994.tb00173.x
Subject(s) - bidding , shareholder , homogeneous , stock (firearms) , mergers and acquisitions , cash flow , portfolio , business , sample (material) , cash , financial economics , monetary economics , economics , finance , microeconomics , corporate governance , mechanical engineering , chemistry , physics , chromatography , engineering , thermodynamics
A sample of cash and stock merger transactions consummated between 1975 and 1987 is used to form homogeneous groups based on financial characteristics of both bidding and target firms. The results are used to determine how group heterogeneity with respect to financial characteristics influences intergroup differences in both bidding firm and target firm merger returns. Stockholders of bidding firms with attributes that fit the free cash flow hypothesis of merger motivation suffer wealth losses relative to firms that have characteristics consistent with achievement of scale or scope economies or financial synergies. Differences in target and merger portfolio returns are also found.