A Review of the Theories of and Evidence on Returns Related to Mergers and Takeovers.

Abstract

The market for mergers and takeovers, often referred to as the market for corporate control [Manne (1965)], has always attracted the attention of investors and researchers because takeovers represent corporate investment decisions on a scale several times larger than the normal, ongoing, growth‐maintaining capital outlays by the typical value‐maximising firm. Although the theoretical justifications for such corporate actions are reasonably well understood, the true motives for the mergers and the strategies adopted by acquiring firms to consummate them can be complex and diverse in scope. Corporate acquisitions can therefore have widespread effects on the wealth of various groups of agents involved in the market for corporate control.

Chapter 1 Collateralizable Wealth, Asset Returns, and Systemic Risk: International Evidence

“…In fact, as Mohsin (2007, 2010) note, monetary policy can be crucial, in particular, if it targets financial conditions (Castro, 2008;Sousa, 2010b). Those linkages, in turn, can be responsible for important wealth dynamics (Mathur and De, 1989;Mathur and Waheed, 1991). This paper explores the predictive power of the trend deviations among asset wealth and human wealth (summarized by the variables rwy and wy) for expected future asset returns.…”