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A bold move or biting off more than they can chew: examining the performance of small acquirers

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  • Nancy L. Harp

    (Clemson University)

  • Kevin H. Kim

    (University of Memphis)

  • Derek K. Oler

    (Texas Tech University)

Abstract

Small acquirers enjoy announcement period returns that are significantly higher than announcement returns for larger acquirers, but small acquirers significantly underperform after the acquisition is consummated. We investigate why the market appears to “get it wrong” at the announcement of an acquisition by a small firm. We provide evidence consistent with an initial optimistic overreaction, followed by a correction as updated information is revealed. Overreaction is clustered in small acquirers offering stock and acquiring relatively larger targets. Low post-acquisition returns and poor fundamental performance are clustered in small acquirers offering stock and diversifying.

Suggested Citation

  • Nancy L. Harp & Kevin H. Kim & Derek K. Oler, 2021. "A bold move or biting off more than they can chew: examining the performance of small acquirers," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 393-422, February.
    • Handle: RePEc:kap:rqfnac:v:56:y:2021:i:2:d:10.1007_s11156-020-00893-x
    DOI: 10.1007/s11156-020-00893-x
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    Cited by:

    1. Joshua Coyne & Kevin H. Kim & Jayson Talakai, 2021. "At‐risk acquirers: survival strategy or last‐ditch effort?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5783-5808, December.

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    More about this item

    Keywords

    Acquisitions; Post-acquisition returns; Small acquirers; Trading volume; Fundamental performance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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