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The Impact of Takeovers on the Fundamental Value of Acquirers

Guest, P, Bild, M and Runsten, M (2010) The Impact of Takeovers on the Fundamental Value of Acquirers Accounting and Business Research, 40 (4). pp. 1-20.

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Abstract

This paper develops a new methodology to examine the financial impact of acquisitions, designed to address whether takeovers yield a positive net present value for the acquiring company. Specifically, we employ the residual income valuation method to compare the fundamental value of the acquiring company before acquisition with the fundamental value after acquisition.We apply this methodology to 303 UK acquisitions completed during 1985–1996, and compare the results with the effects of takeover on profitability and short- and long-run share returns. We find that the impact of acquisition on fundamental value is slightly negative but statistically insignificant. This result differs from the effect of takeover on profitability, which is significantly positive, and the effect of takeover on share returns, which is significantly negative.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
AuthorsEmailORCID
Guest, PUNSPECIFIEDUNSPECIFIED
Bild, MUNSPECIFIEDUNSPECIFIED
Runsten, MUNSPECIFIEDUNSPECIFIED
Date : 8 June 2010
Identification Number : 10.1080/00014788.2010.9663409
Additional Information : This is an Author's Accepted Manuscript of an article published in Accounting and Business Research (2010) copyright Taylor & Francis, available online at: http://www.tandfonline.com/10.1080/00014788.2010.9663409
Depositing User : Symplectic Elements
Date Deposited : 02 Apr 2014 14:31
Last Modified : 09 Jun 2014 13:58
URI: http://epubs.surrey.ac.uk/id/eprint/713999

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