Tijdschrift voor Bank- en Financiewezen vol:5 pages:308-316
This paper empirically investigates shareholder wealth effects surrounding the announcement of mergers and acquisitions between listed companies in the European Union during 1997-2006.
The results show that target investors earn a statistically significant positive abnormal return of 16.82% during the event window from 50 days before until 50 days after the announcement date, while bidder shareholders on average realize an insignificant 0.16%. The ensuing combined shareholder wealth effect equals 2.40% and is significantly different from zero. We also show that the correlation between target and bidder CARs is significantly negative in Continental Europe. We further find that all-cash offers result in significantly lower bidder abnormal returns. Target investors gain more in cross-border than in domestic M&As. Finally, target abnormal returns are significantly higher in UK transactions,while M&A shareholder value effects seem to be larger for Continental European bidders.