This paper presents new empirical evidence suggesting that the market evaluates acquisition announcements in the context of the firm's investment policy. When a firm with superior prior internal investment purchases another, market participants often learn from the acquisition, that internal...

I examine whether market learning and M&A activity affect the association between shareholder rights and acquisition performance. Using a sample of acquisitions completed in the period of 1990-2006, I find that the negative association between governance indices and bidder returns disappears in...