After the crash of 1987, the Nasdaq composite index stayed below the precrash level for nearly two years. Takeover activity surged in this after-crash period. We compare the motives in the acquisitions of Nasdaq targets during the after-crash period with those in the ten-year period before the crash. We find that the announcement period return to acquirers and the proportion of acquirers with positive gains declines in the after-crash period. For both the periods, agency is the motive for takeovers that have negative total gains (acquirer + target), but synergy and hubris are comotives for takeovers that have positive total gains. The proportion of takeovers in which the managers of acquirers act against the interest of the shareholders increases after the crash.
A sample of cash-only acquisitions of Nasdaq targets during 1973-1999 is examined. It is found that the mean (median) percentage premia declines from 74% (65%) during the 1970s to 47% (42%) in the 1990s. Consistent with recent research on the value reduction associated with diversification, it is observed that acquirers generally will not pay higher prices to acquire firms operating in different industries. It is found that over-invested firms pursue acquisitions more aggressively by paying higher premia while under-invested firms pay less, on average. Finally, the evidence suggests that agency rather than synergistic or hubris effects influence the level of merger premia.
This study examines the weekend effect in gold returns during bull and bear markets over the period 1975 through 2011. It shows that gold returns from close on Friday to close on Monday are significantly lower than returns during the rest of the week. This result is due largely to gold returns during bear markets. During gold bull markets, gold weekend returns are not significantly different from weekday returns. The study shows that the effect has substantial economic implications for gold investors. The effect is shown to be related to a significantly negative skewness in the weekend returns.
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