Skip to main content

Research Repository

Advanced Search

Long-run post merger stock performance of UK acquiring firms: A stochastic dominance perspective

Abhyankar, A.; Ho, K.; Zhao, H.

Authors

A. Abhyankar

K. Ho

H. Zhao



Abstract

Using the idea of stochastic dominance, the long-run post-merger stock performance of UK acquiring firms is studied. Performance is compared by using the entire distribution of returns rather than only the mean as in traditional event studies. The main results are as follows: First, it is found that, in general, acquiring firms do not significantly underperform in three years after merger since no evidence of first- or second-order stochastic dominance relation between acquirer and benchmark portfolios is observed. Second, it is found that acquirers paying excessively large premiums are stochastically dominated by their benchmark portfolio implying that overpayment is a possible reason for post-merger underperformance. Consistent with previous studies, it is found that cash financed mergers outperform stock financed ones. Finally, no evidence is observed that glamour acquirers underperform value ones as no stochastic dominance relations between the two. In general, the results underline the importance of examining long-run post-merger stock performance from alternative perspectives.

Citation

Abhyankar, A., Ho, K., & Zhao, H. (2005). Long-run post merger stock performance of UK acquiring firms: A stochastic dominance perspective. Applied financial economics, 15(10), 679-690. https://doi.org/10.1080/09603100500065305

Journal Article Type Article
Publication Date 2005-06
Deposit Date Aug 21, 2008
Journal Applied Financial Economics
Print ISSN 0960-3107
Electronic ISSN 1466-4305
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 15
Issue 10
Pages 679-690
DOI https://doi.org/10.1080/09603100500065305
Public URL https://durham-repository.worktribe.com/output/1560743


You might also like



Downloadable Citations