Department of Finance, Southern Illinois University at Carbondale, Denton Municipal Utilities and University of North Texas, and Murray State University, respectively. A substantial amount of the research was conducted while Davidson and Cheng were at Louisiana Tech University. We would like to express our appreciation to John L. Glascock, Dave Robison, the referee, and David Mayers, a co-editor of the journal, for their suggestions. All errors and omissions are the authors‘.
A Re-Examination of the Market Reaction to Failed Mergers
Article first published online: 30 APR 2012
1989 The American Finance Association
The Journal of Finance
Volume 44, Issue 4, pages 1077–1083, September 1989
How to Cite
DAVIDSON, W. N., DUTIA, D. and CHENG, L. (1989), A Re-Examination of the Market Reaction to Failed Mergers. The Journal of Finance, 44: 1077–1083. doi: 10.1111/j.1540-6261.1989.tb02640.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This study examines the revaluation of shares surrounding the cancellation of mergers over the years 1976–1985. The results are first categorized according to the party cancelling the merger and then by subsequent merger activity. The results are as expected: target firms that become involved in merger activity, subsequent to the cancellation, experience positive cumulative prediction errors (CPEs). Targets that do not become involved in subsequent merger activity have CPEs that return to pre-merger announcement levels. These results do not vary when bidders or targets cancel the merger.