Journal of Accounting and Taxation
Subscribe to JAT
Full Name*
Email Address*

Article Number - F05F3CC47420


Vol.6(2), pp. 30-37 , September 2014
DOI: 10.5897/JAT2014.0142
ISSN: 2141-6664



Full Length Research Paper

The market impact of mergers and acquisitions on acquiring firms in the U.S.



Ronald Stunda
  • Ronald Stunda
  • Valdosta State University, U.S.
  • Google Scholar







 Received: 30 April 2014  Accepted: 18 August 2014  Published: 30 September 2014

Copyright © 2014 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0


Previous studies have examined acquiring firms undergoing mergers and acquisitions along with the impact that these events have on firm security prices.  These studies have had mixed results. Some indicate negative impact on stock prices while others conclude that there is a positive effect. This study extends these previous studies by increasing both the number of firms sampled and the years evaluated. The first finding indicates that when acquiring firms are compared to firms not engaged in M&A activities, the acquiring firms’ stock price effect is significantly negative, while the non-M&A firms’ stock price effect is significantly positive. When the acquiring firms are evaluated by industry membership, findings suggest that firms engaged in M&A activities in all industries evaluated exert a significantly negative effect on stock prices, with the exception of the oil and gas industry along with the banking and financial services industry. These two industries were found to have a significantly positive effect on stock prices. These findings are important because they provide investors, managers and others with additional insight to the effects of mergers and acquisitions, from the acquiring firm’s perspective, on security prices. This study indicates that firms in certain industries may be more positively impacted, from a stock price perspective, than firms in other industries.

 

Key words:  Mergers, acquisitions, security prices, acquiring firms.

Altunbas Y, Ibanes D (2004). Mergers and acquisitions and bank performance. The Role of Strategic Similarities, September, 2011.

 

Bernard V (1987). Cross-sectional dependence and problems in inference in market-based accounting research. J. Account. Res. 25: 1-48.
Crossref

 

Binder J, (1985). Measuring the effects of regulation with stock price data. R and J. Econ.16:167-183.
Crossref

 

Chatterjee R (2011). Mergers and acquisitions: the impact on share price. J. Inst. of Manag. Stud. 11:123-148.

 

Girma S (2008). The impact of mergers and acquisitions on earnings and stock prices. J. Globalization and Labor Markets (Spring): 63-82.

 

Grammatikos T, Yourougou P (1990). Market expectations of the effects of the Tax Reform Act of 1986 on banking organizations. J. Bank. Financ. 14:1171-1187.
Crossref

 

Holmstram B (2001). Corporate governance and merger activity in the U.S. J. Econ. Perspect.15:158-172.

 

Hu Y (2009). The long-term performance of acquiring firms. J. Int. Bus. pp.66-83.

 

Ismail A, Abdou F Annis C (2011). Industry differences associated with mergers and acquisitions. J. Int. Bus., September: 84-101.

 

Kemal M (2001). Post-merger profitability, a case of banks. Int. J. Bus. Social Sci. 5:22-41.

 

Mantravadi P, Reddy A (2008). Post-merger performance of acquiring firms from different industries. Int. Res. J. Financ. Econ. 15:44-67.

 

O'Brien R (2007). Rules regarding variance inflation factors, J. Qual. Quantity pp.673-690.

 

Olinger M, Chambers B, Nelson K (2006). Mergers and acquisitions lead to higher labor productivity. Am. J. Sociol. 87:35-47.

 

Williams J (2010). A case of merger and acquisition blind spot. Allied Acad. Financ. Stud. J. pp.15-29.

 

Wong B, Cheung K, Mun T (2009). The effect of merger and acquisition announcements on security prices of acquiring firms. Int. J. Econ. Financ. 2:119-132.

 

Yen T, Andre P (2010). The effects of ownership structure of acquiring firms. J. Bus. Policy Res. 5:59-76.

 


APA Stunda, R. (2014). The market impact of mergers and acquisitions on acquiring firms in the U.S.. Journal of Accounting and Taxation, 6(2), 30-37.
Chicago Ronald Stunda. "The market impact of mergers and acquisitions on acquiring firms in the U.S.." Journal of Accounting and Taxation 6, no. 2 (2014): 30-37.
MLA Ronald Stunda. "The market impact of mergers and acquisitions on acquiring firms in the U.S.." Journal of Accounting and Taxation 6.2 (2014): 30-37.
   
DOI 10.5897/JAT2014.0142
URL http://www.academicjournals.org/journal/JAT/article-abstract/F05F3CC47420

Subscription Form