What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions


  • Kathleen Fuller,

  • Jeffry Netter,

  • Mike Stegemoller

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    • Fuller and Netter are from Terry College of Business at the University of Georgia. Stegemoller is from Kelly School of Business at Indiana University, Indianapolis. We thank Anup Agrawal; Sanjai Bhagat; Michael Goldstein; E. Han Kim; Marc Lipson; David Mauer; Maureen O'Hara; Bill Petty; Annette Poulsen; Raghu Rau; Sheridan Titman; seminar participants at the University of Georgia and Babson College; and participants at the 11th Annual Financial Economics and Accounting Conference and 7th Mitsui Life Symposium on Global Financial Markets at the University of Michigan, the 2001 European Financial Management Association meetings, the 2001 Financial Management Association meetings, and the 2002 American Finance Association meetings for comments and suggestions on earlier drafts of this paper. All errors are our own.


We study shareholder returns for firms that acquired five or more public, private, and/or subsidiary targets within a short time period. Since the same bidder chooses different types of targets and methods of payment, any variation in returns must be due to the characteristics of the target and the bid. Results indicate bidder shareholders gain when buying a private firm or subsidiary but lose when purchasing a public firm. Further, the return is greater the larger the target and if the bidder offers stock. These results are consistent with a liquidity discount, and tax and control effects in this market.