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Published reviews of the extensive body of research into mergers and acquisitions have generally concluded that shareholders as a body are not adversely affected by acquisition activity. For example Jensen and Ruback (1983) conclude that ‘corporate takeovers generate positive gains, that target firm shareholders benefit, and that bidding firm shareholders do not lose’. In a review of more recent research, however, Jarrell, Brickley and Netter (1988) conclude that acquirers ‘receive at best modest increases in their stock price, and the winners of bidding contests suffer stock‐price declines as often as they do gains’.

We examine bidder returns in Japanese mergers and find that shareholders of bidders experience a significant positive announcement return. Bidder returns are higher when firms acquire targets in the same industry, when their managers performed well before the merger, and when their managers acquire relatively large targets. Unlike non-keiretsu firms, returns to keiretsu firms are higher when they acquire firms operating in different industries. We also find that bidder returns increase with the bidder’s leverage and the bidder’s ties to financial institutions through borrowings. Our evidence is consistent with the view that managerial incentives affect firm value.

The purpose of this paper is to test the hypothesis that relative to a cash acquisition, a stock acquisition would increase the bidder’s investor base and lower Merton’s (1987) shadow cost, which in turn contributes positively to the bidder announcement return.

Using the number of registered shareholders and measures of institutional ownership as the proxies for investor base and investor recognition, this paper compares their changes and the changes in shadow cost between bidders using different methods of payment. The authors examine the relation between the shadow cost reduction and bidder announcement return in a multivariate framework.

This paper finds that given the target type, bidders using stocks experience significantly larger increases in their investor bases and investor recognition than bidders using cash. Additionally, only bidders using stocks experience significant decreases in their shadow costs. In a multivariate framework, the change in the shadow cost has a negative and significant effect on the bidder announcement return in the sample of stock acquisitions and the subsample of bidders using stocks to acquire private targets. These findings support the authors’ hypothesis and suggest that the less established bidders acquiring private targets in particular benefit from the shadow cost reduction.

This paper provides the direct evidence that investor recognition matters in mergers and acquisitions. The findings also provide a complementary explanation for the documented positive bidder returns when bidders use stocks to acquire private targets.

This study seeks to analyze the differences between merger cancellations and three types of takeover failures: failures that are associated with targeted share repurchases (greenmail), failures in which the sole bidder simply withdraws the offer, and failures that are accompanied by a general share repurchase (buyback).

The paper uses event study methods and regression analysis.

The paper observes negative target stock price reactions around all types of takeover failures and merger cancellations. However, the cumulative effect of takeover attempts is positive, suggesting that even unsuccessful tender offers generate permanent gains to target firm shareholders, while the cumulative effect of canceled mergers is negative. Furthermore, the market reaction to greenmail‐induced takeover failure announcements is no worse than that of voluntary withdrawals, suggesting that greenmail may play an efficient role in mitigating the effects of takeover bid withdrawals. Finally, while bidder wealth is destroyed in takeover failures, the effect of merger cancellations on bidders is considerably more devastating.

The paper provides evidence of negative stock price reactions to all forms of merger failure. The paper also shows that the cumulative effect of all types of takeover failures is still positive: suggesting that being put into play is still beneficial overall but that canceled mergers destroy value for both targets and bidders. The paper shows that the market reaction to greenmail‐induced failure announcements is no worse than other forms of failure. Finally, while there is an immediate downturn in target prices around a failure, the negative outcome is more severe for the bidders. Thus, the market sees that there was something useful about the anticipated change in corporate control, which was lost when it failed to be completed.

The purpose of this paper is to investigate bidder and target returns in the time surrounding merger and acquisition (M&A) announcements.

The paper employs parametric and non‐parametric tests and regressions on holding period and abnormal returns to bidder and targets using indicators for equity and mixed financing, hostility, and Fama‐French SMB and HML factors.

The paper provides evidence that the cumulative average abnormal returns to shareholders of bidder companies in equity financed mergers following an M&A announcement are significantly negative.

The paper highlights the fiduciary duty of bidder company management and M&A advisory professionals to bidder company shareholders.

The paper updates the limited research on hostility and bidder returns in Australian M&A literature by re‐examining the share price performance over various windows and controlling for the Fama‐French factors.

Prior studies have reported mixed findings regarding bidder shareholder returns. There are many theories regarding the motivation towards the initiation of a takeover. This study intends to analyze four major merger motivations separately and examine the impact each has on bidder returns. We find the market reacts according to the nature of the takeover and the underlying motive behind the bid.

Some firms choose not to use an investment bank advisor in mergers and acquisitions (M&A) transactions. We test whether this decision affects the merger announcement period returns. We compare the abnormal returns from a sample of 179 in-house acquisitions (in which either the acquirer or the target firm does not hire an investment bank advisor) to those of a matched sample of acquisitions (in which all firms hire an investment bank advisor). We find that not employing a financial advisor has no significant effect on the abnormal returns of acquiring firms but does reduce the abnormal returns of target firms. This relation holds even after controlling for various firm and merger characteristics.

Though cross-border acquisitions have grown dramatically in value and frequency in the last ten years, little is known about returns to acquirers or their method-of-payment choice. This paper studies returns to U.S. bidders and their method-of-payment choice for acquisitions of foreign targets. Results indicate that bidder returns are higher for cash offers, for offers to private and subsidiary targets, if there is high insider ownership, and if there is high exchange rate variation. The method-of-payment choice for these bidders is linked to the target country’s legal regime and accounting standards, insider ownership, target type, and value uncertainty.

This paper aims to empirically analyze the success of European bank mergers and acquisitions (M&As) by an analysis of the shareholder value implications of stock market reactions to announced and canceled M&As in the period from 1999 to 2015.

The analysis of a sample of 467 announced and 54 canceled European bank M&As is conducted using event study methodology. The determinants of the shareholder value creations in M&A are observed in cross-sectional regressions. The likelihood of M&As being canceled is estimated in logit regressions.

The paper finds that European bank M&As have not been successful in terms of shareholder value creation for acquiring banks, whereas targets experienced significant value gains. Abnormal returns for bidders and targets exhibit the same characteristics upon the announcement of M&As that are canceled at a later date, whereas the results for transaction cancelations deviate. Targets experience negative abnormal returns at a larger size than upon the transaction announcement. The findings for bidders are striking, as they destroy shareholder value upon the transaction cancelation, also, consequently they suffer twice. In particular, banks with higher profitability, higher efficiency and lower liquidity experience negative abnormal returns around the announcement dates. Negative abnormal returns prior to the transaction announcement and provision for loan losses increase significantly the likelihood of M&A cancelation.

This paper contributes to the literature expanding existing analyses to the shareholder value implications of canceled European bank M&As in a 17-year long time period. The findings reveal the destructive characteristics of canceled bank M&As and provide innovative insights into European capital market reaction to canceled M&As.

The purpose of this paper is to test whether bank mergers are driven by equity overvaluation and management compensation incentives.

To test whether equity mispricing drive bank mergers, the authors employ two alternative price-to-residual income valuation (P/V) measures for bidders and targets while the authors control for their growth prospects with the price-to-book (P/B) (two years before) ratio. The intrinsic value (V) is estimated using the three-period forecast horizon residual income model of Ohlson (1995) and perpetual residual income model that does not rely on analysts’ forecasts of future earnings prospects. The latter measure allows the authors to estimate V for a much larger sample of banks. The empirical analysis is supplemented with a standard event analysis and assessment of the long-term performance of bank mergers subsequent to the announcement date.

The evidence shows that bidders are overvalued relative to their targets, especially in equity offer deals. The authors also find that highly valued bidders: are more likely to use stock than cash; are willing to pay more relative to the target market price; are more likely to acquire private than public targets; earn lower announcement-period returns; fail to create synergy gains; experience long-term underperformance; and reward their top managers of with large compensation increases subsequent to mergers.

This study provides results consistent with the view that behavioral and managerial incentives play an important role in motivating bank mergers.