Page 79 - Azerbaijan State University of Economics
P. 79
THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 1, 2015, pp. 61-94
cross industry acquirers‘ returns are insignificantly different from zero, while others
had negative returns.
On the contrary, several studies confirm considerable positive abnormal returns for
the acquirers after deal announcement. In a sample of nearly four hundred US
companies between 1975-1984, Franks, Harris and Titman (1991) confirm positive
abnormal returns solely for small deals. In addition, Dutta and Jog (2009) find positive
cumulative abnormal returns during six days event window of 1.6 %
Wealth creation after M&A has been always a matter of debate, particularly
returns of acquirer firms. Some researchers state that economic conditions are one of
the driving factors impacting performance of target and the bidder after transaction
completion. Soufani and Tse (2001) studied in depth the reaction of the stock prices
to the deal announcement in both economic boom and recession. Their sample
comprises over hundred companies engaged in M&A deal in different time intervals
from 1990 to 1993 and 1994 to 1996. Companies have positive abnormal returns in
times of economic prosperity from 1990 to 1993 and negative during 1994-
1996.Their results confirms that there is relationship between economic conditions
and financial performance of targets and bidders.
On the other hand, depending on the transactions and various external factors,
Cisco, General Electric and Intel have increased shareholders‘ wealth by engaging in
mergers and acquisitions, while IBM-Lotus or Novel-Word Perfect generated losses
for acquiring firm shareholders (Capron and Pistre 2002).
79
