Merger Announcements, Financial Performance and Stock Price: A Test of Market Efficiency

Can investors earn above-normal risk-adjusted returns by acting on public information defined merger announcements? This study tests the effect of a sample 14 announcements stock price using event-study methodology. Results show that an investor is not able to make above￾normal announcement mergers in support semi-strong form market efficiency. Merger stimulate significant positive around announcement. over- and under-reaction well documented behavioral finance literature. The evidence shows return reaction up 1 day prior consistent with existence insider trading (Ross others, 2016). Do strengthen companies’ financial performance? are value-increasing based pre-post-merger performance agency problem where large firm use excess free cash flow get “bigger” “better” going shopping for other firms. In such cases, firm’s maximizes size, stockholder wealth, goal firm.