Abstract:Using a modified two factor model, market capitalization and book to market value were found not to add significant value to the shareholders' post-merger returns. Earnings per share (EPS) and the price earnings (P/E) ratio dropped in the year following the merger between the two entities, before eventually picking up in later years. While higher post-merger EPS suggest shareholders from the target firm tend to have benefited more than shareholders from the acquiring firm, the post-merger P/E tend to be higher… Show more
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