!!!Mergers--Wealth effectives..Franksamp;Harris-1989.pdf

Jo of Financial Economics 23 (1989) 225-2 London School of obert S. S Universiy of Virginia, Charlottesville, VA 22906, USA Received November 1986, final version received January I989 This paper examines the effects of over 1,800 U. takeovers on shareholder wealth in the period It shows that around the merger announcement date targets gain 25 to 30 percent and bidders earn zero or modest gains. The U.K. data allow independent tests of many issues addressed in studies of U.S. takeovers. Target gains are nigher in the U.K. after 1968, suggesting that increases in U.S. target gains at the same time may not be attributable to the Williams Act. Bostmerger share-price performance suggests that acquisitions follow favorable developments in bidders’ equity prices. In their review of the em * ical evidence on sharehol U.S. takeovers, Jensen and back (1983) conclude tha r at least do not lose. Ther ensus about the or example, Firth’s (197 targets are more than offset by losses to bi (1977), in contrast, report gains to both however, these papers suffer from either sm short periods of calendar time. An obiective of this paper is to resolve by providing a co prehensive study of we *We thank Mike Staun programming assistance, pants at Seminars at the editors. 030 or 226 J, R. Frunks md R.S. Hurris, Weult