Posted: May 2nd, 2015

Merger and Acquisition In the short-run empirical evidence suggests that acquisitions have, at best, an insignificant impact on shareholder wealth (Firth, 1980). In the long-run there is overwhelming evidence of negative returns (Sudarsanam and Mahate,

Paper, Order, or Assignment Requirements

Instructions:
Critical Literature on pros and cons or the motives of M&A ( why firms engage into merger and acquisition presenting theories such as wealth creation theory, managerial utilities theory, synergy motive, market power hypothesis, …and so on.
Within 1000 words
Empirical evidence on event studies for SHORT RUN (500 words).
Empirical evidence based on accounting data for – SHORT RUN
– LONG RUN.
For example, Limmack (1991) investigated 592 UK mergers between the period of 1977 to 1986 with 592 UK mergers and acquisitions using three different benchmarks in measuring abnormal returns, recorded an significant return of -4.67% with The London Business School beta model (LSB),a significant return of -4.6% with the CAPM, and significant return of -7.43% for the Zero one model within the announcement period of 0 to +24 months. A further study shows a significant wealth loss to the acquiring firms in a period of over 24 months.

Limmack, R. J. (1991). ‘Corporate mergers and shareholder wealth effects’: 1977-1986. Accounting and Business Research, 21(83), 239-252.