The (Missing) Relation Between Announcement Returns and Value Creation / Itzhak Ben-David, Utpal Bhattacharya, Stacey E. Jacobsen.

Format:

Book

Author/Creator:

Ben-David, Itzhak.

Contributor:

National Bureau of Economic Research.

Bhattacharya, Utpal.

Jacobsen, Stacey E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27976.

NBER working paper series no. w27976

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Acquisition announcement returns are widely considered market-based assessments of value creation. Unfortunately, the data do not support this conjecture. We show that commonly used and new measures of realized acquisition outcomes are correlated among themselves, though derived from different sources. Furthermore, these outcomes are predictable using standard information known at the announcement time. In contrast, announcement returns--also measured at the announcement time--are uncorrelated with these outcomes. Importantly, announcement returns even fail to predict the predictable components of these outcomes. Overall, there is no evidence that announcement returns capture expected or realized value creation.

Notes:

Print version record

October 2020.