How different is the long-run performance of mergers in the telecommunications industry?

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Using a sample of telecommunications mergers during the 1990-1993 period, we find that acquiring firms underperform relative to their size and industry-matched control firms. The annual cumulative abnormal returns (CARs) to these firms are significantly negative for five years following the merger. Shareholders of the acquiring firm suffer a wealth loss of nearly 20% over the five-year post-merger period. We obtain similar results from three- and five-year holding period returns (HPRs). Our findings are consistent with those of earlier studies and indicate that regulated industries also experience post-merger underperformance. We do find upon disaggregation of the sample that larger mergers exhibit positive long-run performance while the mid-size and smaller mergers underperform relative to their control firms. We further observe that conglomerate mergers demonstrate superior long-run performance while that for non-conglomerate mergers is consistent with the aggregate sample findings and suggests significant underperformance. © 2002.
Publisher
JAI Press
Issue Date
2002
Language
English
Citation

ADVANCES IN FINANCIAL ECONOMICS, v.7, no.0, pp.127 - 144

ISSN
1569-3732
URI
http://hdl.handle.net/10203/4059
Appears in Collection
MT-Journal Papers(저널논문)
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