Doukas, John A.
[Verfasser:in]
;
Travlos, Nickolaos G.
[Sonstige Person, Familie und Körperschaft];
Holmen, Martin
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 27, 2001 erstellt
Beschreibung:
We study the short- and long-term valuation effects of Swedish takeovers. Using a sample of 93 bidding firms that acquired 101 targets between 1980 and 1995, we find that diversifying acquisitions lead to a negative market reaction and deterioration of the operating performance of the bidder. Our findings do not support the internal capital market hypothesis that postulates information asymmetries and market imperfections enhance the value of diversification. We find that the typical bidder is a growing firm while the target has a weaker performance than its industry competitors. Performance gains in each of the three years following the acquisition occur only when bidders expand their core business rather than diversify in peripheral lines of business. The announcement gains are also greater for firms that chose to expand their core lines of business. Our findings suggest that focused acquisitions lead to greater synergies and operating efficiencies than diversifying acquisitions. This implies that agency costs associated with diversification outweigh possible benefits arising from the creation of internal capital markets. Further, we find that concentrated ownership in the hands of insiders does mitigate the losses of diversifying bidders