Article ID Journal Published Year Pages File Type
5103562 The Quarterly Review of Economics and Finance 2017 14 Pages PDF
Abstract
The winner's curse is often associated with acquisitions of publicly-traded firms but not with private acquisitions. Using an event study methodology for over 22,000 private acquisitions of U.S. firms between 1985 and 2015, we examine a possible winner's curse for such acquisitions. While the average return to private acquisitions is slightly positive, fully 46% of acquirers experience statistically significant negative abnormal announcement returns, strongly suggesting a winner's curse. We also find that acquirer competition, informational asymmetries, and overconfidence all reduce announcement returns, which is consistent with the winner's curse. In addition, we carry out a comparative analysis of acquisitions of publicly-traded targets and find a statistically significant negative average return, as is consistent with much previous work. We find that 54% of acquirers of publicly-traded firms obtain statistically significant negative returns, suggesting a stronger winner's curse for public than for private acquisitions.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,