Long-run performance of mergers and acquisition of privately held targets: Evidence in the USA

Shao-Chi Chang, Ming Tse Tsai

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

In this study, we examine the long-run performance of firms acquiring privately held targets. Past studies have documented a positive market reaction to the announcement of Mergers and Acquisitions (M&A) of privately held targets. The M&As of privately held targets involve uncertain information, which investors are more likely to misestimate. In this study, we tested the long-run performances of acquiring firms and found negative results. We further found that the stock performance of acquiring firms was superior prior to the M&A. Our results suggest that investors may over-extrapolate prior good performance and that the long-run reversed return corrects the overestimation in response to announcements of M&A.

Original languageEnglish
Pages (from-to)520-524
Number of pages5
JournalApplied Economics Letters
Volume20
Issue number6
DOIs
Publication statusPublished - 2013 Apr 1

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Long-run performance
Mergers and acquisitions
Investors
Announcement
Market reaction
Stock performance
Long-run returns

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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Long-run performance of mergers and acquisition of privately held targets : Evidence in the USA. / Chang, Shao-Chi; Tsai, Ming Tse.

In: Applied Economics Letters, Vol. 20, No. 6, 01.04.2013, p. 520-524.

Research output: Contribution to journalArticle

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