NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do shareholders of acquiring firms gain from acquisitions?

Sara B. Moeller, Frederik P. Schlingemann, Rene M. Stulz

NBER Working Paper No. 9523
Issued in March 2003
NBER Program(s):   AP   CF

We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained $8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.

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Document Object Identifier (DOI): 10.3386/w9523

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