Divergence of Opinion and Post-Acquisition Performance
We examine the relation between divergence of opinion about the value of the acquiring firm in the pre-acquisition announcement period and post-acquisition stock returns. We find that acquirers subject to high opinion dispersion earn lower future returns than acquirers subject to low dispersion. It appears that, on average, only acquirers in the high divergence of opinion subset experience significant negative post-event abnormal returns. In the spirit of <link rid="b29">Miller (1977)</link>, such evidence implies that high pre-event investor disagreement leads to systematic overpricing of acquirers that manifests itself through long-run underperformance of their stock. The documented misvaluation persists irrespective of the opinion divergence proxy and performance evaluation method used and after controlling for several common deal and acquirer characteristics. Copyright 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.
Year of publication: |
2007-04
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Authors: | Alexandridis, George ; Antoniou, Antonios ; Petmezas, Dimitris |
Published in: |
Journal of Business Finance & Accounting. - Wiley Blackwell, ISSN 0306-686X. - Vol. 34.2007-04, 3-4, p. 439-460
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Publisher: |
Wiley Blackwell |
Saved in:
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