Stock Merger Activity and Industry Performance
نویسندگان
چکیده
We propose a continuous merger activity variable (MAV) as an alternative to discrete industry merger waves. Ranking industries by MAV within a quarter removes the market-wide trend and gives a powerful measure of relative industry stock merger activity that is associated with strong patterns in before and after industry returns and operating performance. During 1989-2015, bucket 1 containing industries with lowest MAV rank earns alpha of 0.30% per month higher than bucket 12 containing industries with highest MAV rank. Our evidence is consistent with industry misvaluation theory of stock merger activity by Rhodes-Kropf and Viswanathan (2004) rather than neoclassical theory.
منابع مشابه
Valuation Waves and Merger Activity: The Empirical Evidence1
Merger intensity spikes in times of high market valuations (i.e., when average M/B ratios are at their highest). This is especially true for stock-based mergers, supporting recent theories by Rhodes-Kropf and Viswanathan (2002) and Shleifer and Vishny (2003). To explore whether this is the result of correlated valuation errors or behavioral mispricing we decompose M/B into three components: fir...
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