Asset‐sales‐induced Abnormal Returns Ofacquiring Firms

Abstract

The empirical evidence on mergers and takeovers indicates that positive gains due to mergers and takeovers ac‐crue almost entirely to the target firms. While average abnormal returns to target firms are invariably positive, returns to bidding firms are negative in case of mergers and not significantly different from zero in case of takeovers (see Jensen and Ruback [1983] and De and Mathur in this issue for a review of the empirical evidence). That acquiring firms should offer the shareholders of the target firms such handsome rewards and accept marginal returns for themselves is one of the unresolved problems in the context of mergers and takeovers.