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Do more mergers and acquisitions create value for shareholders?

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Abstract

How does an investor value the announcement of new business integration? The history of acquirer’s acquisition may matter for investors. Existing research are divided to the positive or negative answer to the question. Based on the global evidence of 24,263 acquisitions across 81 countries over 19 years, this paper argues that the current contradictory views have failed to take into account the time interval between acquisitions. This is because the wavelength of merger frequency can change the investors’ expectations of new business integration and so investment returns. With control of the time interval of a new merger we discover that more mergers generate lower abnormal returns. This finding extends our understanding of the value perception of investors on a merger announcement that can be affected not only by merger numbers but also by their time distribution.

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Notes

  1. We also use a larger cut-off of $50 million and the results remain intact. The results (not reported) for the sake of brevity, are available from the authors upon request.

  2. Here we cannot count time interval between deals for infrequent acquires because they only made one deal. Therefore, we use the frequent acquirers as the reference group.

  3. For robustness, all models are re-estimated on the basis of 3-day CARs. As shown in the Appendix (Table 11), our results are robust to different event day windows.

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Authors and Affiliations

  1. Technology and Management Centre for Development, Department of International Development, University of Oxford, Oxford, OX1 3TB, UK

    Shaomeng Li

  2. Peking University HSBC Business School (PHBS), Foxcombe Hall, Boars Hill, Oxford, OX1 5HR, UK

    Guy S. Liu

  3. Brighton Business School, University of Brighton, Mithras House, Lewes Road, Brighton, BN2 4AT, UK

    Andros Gregoriou

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  1. Shaomeng Li
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  2. Guy S. Liu
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Correspondence to Guy S. Liu.

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Appendix

Appendix

See Tables 7, 8, 9, 10, 11 and 12.

Table 7 Univariate analysis of 5-day cumulative abnormal returns by dear order
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Table 8 Univariate analysis of 3-day cumulative abnormal returns by M&A frequency
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Table 9 Univariate analysis of 3-day cumulative abnormal returns by deal order
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Table 10 Univariate analysis of 3-day cumulative abnormal returns by deal order and temporal interval
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Table 11 Cross sectional regression analysis of 3-day cumulative abnormal returns
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Table 12 Cross sectional regression analysis of 5-day cumulative abnormal returns—excluding US deals
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Li, S., Liu, G.S. & Gregoriou, A. Do more mergers and acquisitions create value for shareholders?. Rev Quant Finan Acc 56, 755–787 (2021). https://doi.org/10.1007/s11156-020-00908-7

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