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Market Returns to Acquirers of Substantial Assets

Author

Listed:
  • Raymond da Silva Rosa

    (UWA Business School, University of Western Australia, 35 Stirling Highway, Nedlands, WA 6009.)

  • Thuy Nguyen

    (Macquarie Bank, 20 Bond St, Sydney, NSW, 2000.)

  • Terry Walter

    (School of Banking and Finance, The University of New South Wales, Sydney, 2052 and Capital Markets Cooperative Research Centre Limited, Level 2, 9 Castlereagh Street, Sydney NSW 2000)

Abstract

Does poor post-acquisition performance characterise firms that make non-M&A acquisitions? We investigate the wealth effects of substantial asset acquisitions (i.e. acquisitions that cost over $10 million) on acquiring firms' shareholders. We find significant abnormal positive market reaction to asset acquisition announcements and contrary to findings for firms undertaking M&As, the acquiring firms perform exceptionally well post-acquisition. Our findings are robust to the research method weaknesses common to many studies of long-term performance and we control for free-cash-flow as well. Our results contradict the hubris hypothesis of acquisitions and lend weight to the argument that the auction-style process that characterizes corporate takeover bids contributes to overpayment.

Suggested Citation

  • Raymond da Silva Rosa & Thuy Nguyen & Terry Walter, 2004. "Market Returns to Acquirers of Substantial Assets," Australian Journal of Management, Australian School of Business, vol. 29(1_suppl), pages 111-133, June.
    • Handle: RePEc:sae:ausman:v:29:y:2004:i:1_suppl:p:111-133
    DOI: 10.1177/031289620402901S05
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    References listed on IDEAS

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    Cited by:

    1. Leonardo Fernandez, 2012. "Price Discovery, Investor Distraction and Analyst Recommendations Under Continuous Disclosure Requirements in Australia," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2012, January-A.
    2. Stewart Jones & David A. Hensher, 2007. "Evaluating the Behavioural Performance of Alternative Logit Models: An Application to Corporate Takeovers Research," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7‐8), pages 1193-1220, September.
    3. David A. Hensher & Stewart Jones & William H. Greene, 2007. "An Error Component Logit Analysis of Corporate Bankruptcy and Insolvency Risk in Australia," The Economic Record, The Economic Society of Australia, vol. 83(260), pages 86-103, March.
    4. Lien Duong & Izan H. Y. Izan, 2012. "Consequences of Riding Takeover Waves: A ustralian Evidence," International Review of Finance, International Review of Finance Ltd., vol. 12(4), pages 399-434, December.

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