Event analysis of the impact of mergers and acquisitions on the financial performance of the U.S. forest products industry

The U.S. forest products industry has witnessed an unprecedented period of mergers and acquisitions (M&As) in recent years. In this study, the impact of 70 M&As from 1990 to 2004 on the financial performance of 85 publicly traded forest firms was evaluated. The examination of abnormal returns revealed that the equity market had responded to these M&As. The average cumulative abnormal returns for all the firms as a group ranged from 1.66% for the 15-day event window to 3.03% for the 3-day event window. From the cross-sectional regressions, the position as a target firm and the relative transaction size explained a large portion of the variations of the individual firms' cumulative abnormal returns. Finally, risk analyses through the Capital Asset Pricing Model showed that the risk for some of the selected 14 acquiring firms had changed after the M&As.