Behavioral Explanations of Stock Price Performance Following Merger:Evidence From a Decomposition of Market-to-book Ratios

• Main Authors: Tzu-yu Chang, 張子育
• Other Authors: Lee-Young Cheng
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/13141601162762750642

碩士 === 國立中正大學 === 財務金融所 === 96 === The goal of this study is to extend Rhodes-Kropf, Robinson, Viswanathan (2005) analysis and try to sort these possibilities by examining whether announcement period returns and post-merger stock performance are related to firm-specific misvaluation, sector-wide misvaluation, or long-run fundamental value of bidder and target. We find that high firm-specific error acquirers have more negative announcement returns than low firm-specific error acquirers. High time-sector error acquirers have more negative returns than low time-sector error acquirers. Firm-specific misvaluation, sector-wide misvaluation, and long-run fundamental value of targets do not affect merger and acquisition announcement period returns. For the long-run stock performance we find acquiring firm-specific misvaluation, and industry (market-wide) misvaluation is negatively related to three-year abnormal buy and hold returns. Consistent with Rosen (2006) that bidder stock prices are more likely to reversal in the long run. That means markets are not efficient. We also find that cash acquirers are less overvalued than stock acquires, and cash targets are undervalued relative to stock targets, which is consistent with Rhodes-Kropf, Robinson, and Vishanathan (2005). However, they show that low long-run value firm buy high long-run value target is a puzzle for theories of merger activity, which is inconsistent with our results. We find long-run value-to-book for targets is similar to acquirers, both in cash and stock acquisitions. It seems that high long-run value-to-book acquirers buy high long-run value-to-book targets, during period of 1994-2003.