Hostname: page-component-745bb68f8f-l4dxg Total loading time: 0 Render date: 2025-01-11T23:36:18.800Z Has data issue: false hasContentIssue false
  • English
  • Français

Abstract: Stock Price Movements of Firms Engaging in Large Acquisitions

Published online by Cambridge University Press:  19 October 2009

Ronald W. Melicher  and
Thomas R. Harter
Get access Rights & Permissions [Opens in a new window]

Extract

During the past two decades, corporate managements have been increasingly Interested in growth through mergers and acquisitions. This external growth trend has been accompanied by the development of several merger strategies and philosophies. As a result, merger literature is frequently concerned with concepts such as price-earnings ratio strategy [13] and merger synergy. Synergy may be operational (e.g., the development of marketing or production economies) and/or financial in nature. Although financial synergy may produce “real” benefits (e.g., a lower cost of capital or increased cash flows), it is the general custom today to associate financial synergy with temporary [8], pecuniary [10], or instantaneous [9] earnings per share benefits.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 7 , Issue 2 , March 1972 , pp. 1469 - 1475
Copyright
Copyright © School of Business Administration, University of Washington 1972

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Accounting Principles Board. Earnings Per Share, Opinion No. 15. New York: American Institute of Certified Public Accountants, Inc., May 1969.Google Scholar
[2]Accounting Principles Board. Business Combinations, Opinion No. 16. New York: American Institute of Certified Public Accountants, Inc., August 1970.Google Scholar
[3]Block, Stanley. “The Merger Impact on Stock Price Movements.” MSU Business Topics, Vol. 17, Spring 1969, pp. 7–12.Google Scholar
[4]Federal Trade Commission. Large Mergers in Manufacturing and Mining 1948–1969. Washington: Bureau of Economics, Statistical Report No. 5, February 1970.Google Scholar
[5]Federal Trade Commission. Current Trends in Merger Activity, 1969. Washington: Bureau of Economics, Statistical Report No. 6, March 1970.Google Scholar
[6]Hogarty, Thomas F. “The Profitability of Corporate Mergers.” The Journal of Business, Vol. 43, July 1970, pp. 317–327.CrossRefGoogle Scholar
[7]Kelly, Eamon M.The Profitability of Growth Through Mergers. University Park: Pennsylvania State University, 1967.Google Scholar
[8]May, Marvin M. “The Earnings Per Share Trap.” Financial Analysts Journal, Vol. 24, May–June 1968, pp. 113–117.Google Scholar
[9]Mead, Walter J. “Instantaneous Merger Profit as a Conglomerate Merger Motive.” Western Economic Journal, Vol. VII, December 1969, pp. 295–306.Google Scholar
[10]Narver, John C. “Some Observations on the Impact of Antitrust Merger Policy on Marketing.” Journal of Marketing, Vol. 33, January 1969, pp. 24–31.Google Scholar
[11]New York Stock Exchange. “Mergers, Consolidations and Acquisitions of a Listed Company by Another Listed Company During (1960–1969).” Department of Stock List.Google Scholar
[12]Reid, Samuel R.Mergers, Managers, and the Economy. New York: McGraw-Hill Book Company, 1968, Chapter 8.Google Scholar
[13]Smalter, Donald T., and Lancey, Roderic C. “P/E Analysis in Acquisition Strategy.” Harvard Business Review, XLIX, November–December 1966.Google Scholar