Takeover studies: Take note of the size and the age of firms in your sample

Abstract

This study investigates the reasons for the disagreement among takeover studies on whether the return to bidders (short-term and long-term) is zero or negative. It documents that the two-day announcement-period bidder returns are inversely related to the size and age of targets, but positively related to the age of bidders. Conversely, five-year buy-hold returns (adjusted for size, market-to-book equity, and price momentum) if measured from the date of announcement are positively related to the size of targets, and if measured from the date of resolution are negatively related to the age of bidders. These and other findings are taken to suggest that if takeover studies impose different restrictions on the size and/or age of firms in the sample (and the study documents that they do), they could end up with contradictory findings about bidder returns.

Citation

Gondhalekar, V. (2002), "Takeover studies: Take note of the size and the age of firms in your sample", Hirschey, M., John, K. and Makhija, A.K. (Ed.) Innovations in Investments and Corporate Finance (Advances in Financial Economics, Vol. 7), Emerald Group Publishing Limited, Leeds, pp. 145-162. https://doi.org/10.1016/S1569-3732(02)07008-1