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Indexing mergers and acquisitions.

Gang, J. and Guo, M. and Hu, N. and Li, X. (2018) 'Indexing mergers and acquisitions.', Quantitative finance., 18 (6). pp. 1033-1048.


We measure the efficiency of mergers and acquisitions by putting forward an index (the ‘M&A Index’) based on stochastic frontier analysis. The M&A Index is calculated for each takeover deal and is standardized between 0 and 1. An acquisition with a higher index encompasses higher efficiency. We find that takeover bids with higher M&A Indices are more likely to succeed. Moreover, the M&A Index shows a strong and positive relation with the acquirers’ post-acquisition stock performance in the short run and operating performance in the long run. After constructing three portfolios under a buy-and-hold strategy, we find that efficient portfolios with the highest indices earn higher equity returns and monthly alphas than inefficient portfolios with the lowest indices. Overall, our findings indicate that the M&A Index is positively associated with merger outcomes for acquirers.

Item Type:Article
Full text:(AM) Accepted Manuscript
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Publisher statement:This is an Accepted Manuscript of an article published by Taylor & Francis in Quantitative Finance on 06 Oct 2017, available online:
Date accepted:11 August 2017
Date deposited:17 August 2017
Date of first online publication:06 October 2017
Date first made open access:06 October 2018

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