Stock market prices are investigated around the dates of takeover offers. The 242 companies in the sample of takeover offers are classified firstly as offerors and offerees, and secondly as to whether or not the takeover was achieved. The study employs the two parameter asset pricing model and allows for shifts in risk.
Any gains arising from takeovers are won by the acquired firm at the expense of the acquiring firm. The stock market reaction to takeover offers is generally consistent with the Efficient Markets Hypothesis with one notable exception. Alternative interpretations of this anomaly are considered.
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