Market Valuation and Acquisition Quality: Empirical Evidence Academic Article

abstract

• Existing research shows that significantly more acquisitions occur when stock markets are booming than when markets are depressed. Rhodes-Kropf and Viswanathan (2004) hypothesize that firm-specific and market-wide valuations lead to an excess of mergers, and these will be value destroying. This article investigates whether acquisitions occurring during booming markets are fundamentally different from those occurring during depressed markets. We find that acquirers buying during high-valuation markets have significantly higher announcement returns but lower long-run abnormal stock and operating performance than those buying during low-valuation markets. We investigate possible explanations for the long-run underperformance and conclude it is consistent with managerial herding.

authors

• Bouwman, Christa

published proceedings

• Review of Financial Studies

altmetric score

• 3

author list (cited authors)

• Bouwman, C., Fuller, K., & Nain, A. S.

citation count

• 196

complete list of authors

• Bouwman, Christa HS||Fuller, Kathleen||Nain, Amrita S

publication date

• February 2009

publisher

• Oxford University Press (OUP)  Publisher

published in

• The Review of Financial Studies  Journal

keywords

• 35 Commerce, Management, Tourism And Services
• 3502 Banking, Finance And Investment
• 38 Economics
• 3801 Applied Economics

Digital Object Identifier (DOI)

• 10.1093/rfs/hhm073

start page

• 633

end page

• 679

volume

• 22

issue

• 2

URL

• http%3A%2F%2Fdx.doi.org%2F10.1093%2Frfs%2Fhhm073