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Who Gains from Buying Bad Bidders?

Published online by Cambridge University Press:  31 March 2014

David Offenberg ,
Miroslava Straska  and
H. Gregory Waller
David Offenberg
Affiliation:
doffenberg@lmu.edu, College of Business Administration, Loyola Marymount University, 1 LMU Dr MS 8385, Los Angeles, CA 90045
Miroslava Straska
Affiliation:
mstraska@vcu.edu
H. Gregory Waller
Affiliation:
hgwaller@vcu.edu, School of Business, Virginia Commonwealth University, Box 844000, Richmond, VA 23284.
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Abstract

We study the value gains from takeovers of firms with poor acquisition histories. We document that the premium received by target shareholders is higher when the value loss from the targets’ prior acquisitions is larger. However, the gains to target shareholders seem to be offset by losses to acquiring shareholders. The average announcement return to acquiring shareholders is negative and decreasing in the value loss from the targets’ prior acquisitions. Additionally, the combined acquirer-target value created in these takeovers is insignificant. These results suggest that the value lost from targets’ prior acquisitions is not recovered through changes in corporate control.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 49 , Issue 2 , April 2014 , pp. 513 - 540
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2014 

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