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Evidence of excess comovement in US mergers


Östberg, Per Nils Anders; Wenk, Christoph (2012). Evidence of excess comovement in US mergers. Swiss Finance Institute Research Paper Series 12-33, University of Zurich.

Abstract

This paper considers changes in market comovement of merging US firms. Comparing the expected to the actual post merger comovement, we find that the post merger beta exhibits excess comovement with the acquiring firm. This suggests that the firm’s comovement is at least partly determined by its investors. We find that the excess comovement is significantly greater in cash transactions, when target shareholders tender their entire stake, than in pure stock transactions. Additionally, we document that the excess comovement is greater when the target is included in the S&P 500 as a result of the merger.

Abstract

This paper considers changes in market comovement of merging US firms. Comparing the expected to the actual post merger comovement, we find that the post merger beta exhibits excess comovement with the acquiring firm. This suggests that the firm’s comovement is at least partly determined by its investors. We find that the excess comovement is significantly greater in cash transactions, when target shareholders tender their entire stake, than in pure stock transactions. Additionally, we document that the excess comovement is greater when the target is included in the S&P 500 as a result of the merger.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
JEL Classification:G34, G12, G02
Language:English
Date:2012
Deposited On:01 Feb 2013 07:50
Last Modified:17 Feb 2018 00:58
Series Name:Swiss Finance Institute Research Paper Series
Number of Pages:47
OA Status:Green
Official URL:http://ssrn.com/abstract=2175597
Other Identification Number:merlin-id:7935

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