Empirical evidence

Question 1

Financial characteristics approach

Answer 1

Pre and post merger acquisition data

Question 2

Capital markets approach

Answer 2

Focus on announcement gains

Question 3

Franks and Harris (1989)

Answer 3

2000 targets 1000 bidders
1955-1985
Data from EXTEL
T-4 to T+1

Question 4

Franks and Harris (1989) results

Answer 4

AAR targets month 0 = 23%
AAR bidders month 0 = 1%
CAAR targets T-4 to T+1 = 30%
CAAR bidders T-4 to T+1 = 8%

Question 5

Conclusion

Answer 5

Targets gain and bidders make modest gains
Targets gain significantly +|- 30% (Danbolt)
Results are mixed depends on bid characteristics