Long-Term Post Acquisition Performance of Acquiring Firms: Evidence From Sweden
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
In this thesis the five-year post-acquisition performance of 29 acquiring firms, listed on the Stockholm Stock Exchange, is studied. The sample period covers the years between 1981 and 1996. Factors that we test for a possible impact on the abnormal returns for the acquirers are the type of acquisition, the type of acquirer, and the mean of payment. Using the market model for approximating the abnormal returns, and the buy-and-hold approach for calculating the average returns for each month, we detect no significant abnormal returns for all the included companies as a whole. Dividing the firms into sub-groups according to the factors to be tested, the abnormal returns for conglomerate and related acquisitions are not significantly different from zero, thereby rejecting our hypothesis that conglomerate acquisitions are inferior to related. For growth firms the abnormal returns are positive and significant for the first months after the acquisition, while transactions made by value or neutral companies do not result in any significant abnormal returns, thus rejecting the over-extrapolation hypothesis. Cash deals generate significant positive abnormal returns, whereas stock financed acquisitions under-perform, resulting in significant negative excess returns, supporting the signalling effect theory, stating that managers who believe that their stock is overvalued tend to prefer paying with stock. For mixed financed deals the abnormal returns are not significantly different from zero. One has to consider the effects of choice of method and benchmark for calculating abnormal returns when interpreting the results, since it has been proved that different methodologies give differing results. The disagreement of researchers is high and there are still many unanswered questions on this topic.
Place, publisher, year, edition, pages
IdentifiersURN: urn:nbn:se:su:diva-2670OAI: oai:DiVA.org:su-2670DiVA: diva2:191735