Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Department of Finance, Copenhagen Business School Working Paper Series, Department of Finance, Copenhagen Business School

No 2000-4:
Post-Acquisition Performance in the Short and Long Run Evidence from the Copenhagen Stock Exchange 1993-1997

Jan Jakobsen and Torben Voetmann

Abstract: This paper investigates the short-run price adjustment around the acquisition announce-ment

and the long-run upward bias of the cross-sectional average buy-and-hold returns.

We apply the geometric Brownian motion model to decompose the cross-sectional ave r-age

long-run returns into mean components and volatility components. The decomposi-tion

is necessary in order to interpret security performance correctly using the measure of

wealth relatives. This procedure is useful for any studies of long-run security perform-ance.

The most surprising finding is that the long-horizon abnormal return after three

years is not significantly different from zero. This implies that the acquiring firms do not

under perform significantly compared to the market. That result stands in contrast to

findings of other studies, and it may reflect that earlier studies do not adjust for the vola-tility

component. This indicates that the market efficiency hypothesis is intact in the long

run. It is only in the very short run, i.e. a few days around the acquisition announcements,

that the market makes a significant adjustment to uphold the efficiency hypothesis.

Keywords: Event-study methods; wealth relatives; long-run returns; acquisitions; (follow links to similar papers)

JEL-Codes: G14; G34; (follow links to similar papers)

30 pages, October 1, 1999

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

7190    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:cbsfin:2000_004 This page was generated on 2014-12-14 19:21:43