Stock Returns in Mergers and Acquisitions ∗

  title={Stock Returns in Mergers and Acquisitions ∗},
  author={Dirk Hackbarth and Erwan Morellec},
This paper develops a real options framework to analyze the behavior of stock returns in mergers and acquisitions. In this framework, the timing and terms of takeovers are endogenous and result from value-maximizing decisions. The implications of the model for abnormal announcement returns are consistent with the available empirical evidence. In addition, the model generates new predictions regarding the dynamics of firm-level betas for the period surrounding control transactions. Using a… CONTINUE READING
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