Impact of mergers and acquisitions on stock prices: The U.S. ethanol-based biofuel industry

• Ethanol-based industry is one of the primary biofuel manufacturing industries in USA.
• Mergers and acquisitions (M&As) in the industry have increased in recent years.
• How it impacts investor confidence and hence the value of the firm (stock price).
• This study evaluates the impact of recent M&As in the ethanol-based fuel industry.
• Results from this study show a positive cumulative gain in financial returns.

Corporate restructuring activities in the form of mergers and acquisitions (M&As) are ongoing in the U.S. ethanol-based biofuel industry. With regard to M&As, a widespread concern is about financial performance of an individual firm and stable financial performance of the overall industry. Using an event analysis method, this study explores the impact of recent M&As on stock prices and value of the firm of publicly traded ethanol-based biofuel industry between 2010 and 2012 in the United States. Results regarding the average cumulative abnormal returns of acquiring firms suggest that the market positively responded toward recent M&As in the industry. Around 4% positive growth on a 60-day event window was attributed to M&As using market-adjusted market portfolio. A significant positive 0.47% gain in cumulative returns in a 4-day event window and a 2.7% positive gain in a 10-day event window were suggested by this study.