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Research Method and the Long-Run Performance of Acquiring Firms
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Philip Brown and Raymond da Silva Rosa
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Abstract
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The long-run performance of successful bidders in a takeover has been controversial.
We assess their long-run performance by controlling for survival, firm size, and
measurements bias in return cumulation. Measures of the performance of acquiring firms
relative to control firms are sensitive to survival constraints implicit in the
sampling process and to share return characteristics empirically associated with
trading frequency. In the pre-bid and bid periods, the strong share market performance
of acquiring firms masks the bias; it is more salient after the bid. Controlling for
survival mitigates the new-listing and delisting biases in the pre-and post-bid
periods.
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Download this article.
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Keywords
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TAKEOVERS; ACQUIRING FIRMS; LONG-RUN PERFORMANCE.
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Contact Details
Raymond da Silva Rosa
Department of Accounting and Finance
University of Western Australia
Nedlands WA 6907
E-mail: rdasilva@ecel.uwa.edu.au
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We acknowledge the expert computing assistance of Jennifer Cross and Paul Vowles.
The paper has benefited from comments received from participants at workshops
at the Melbourne Business School, the University of Sydney and at the 1997
French Finance Conference.
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