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Download or read book Merger and Acquisition Performance Measured Through a Characteristic-based Benchmark written by Fadi Sami Chlah and published by . This book was released on 2008 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt: Post- Merger and Acquisition stock performance has been extensively examined, an d results have been mixed. Anomalies in finance lead to imprecise results, espec ially for long-term performance measurements. Methodological errors, length of t ime and the use of improper control models or examined samples can be the result of the misinterpretation of the performance of firms engaging in merger or acqu isition deals. Market- and accounting-based studies of long-term stock performan ce yielded conflicting results; moreover, these studies have been subjected to c riticism for the use of improper methodologies. In this paper we used a new benchmark constructed initially by Daniel, K., Grinb latt, M., Titman, S., and Wermers, R. (1997), known as the characteristic-based benchmark. This benchmark is based on size, book-to-market ratio and momentum. T his allows measuring the abnormal performance with a characteristic-based approa ch that provides better estimates of expected returns than those provided by fac tor sensitivities analysis. We examined one- to five-year abnormal performance for overlapping and non-overl apping mergers; the abnormal returns for all the five years examined were negati ve. We found an overall severe underperformance for all bid characteristics with an increasing magnitude each year, reaching -45% for the five-year period. Ther eby, it seemed that investment by acquiring or merging with other firm(s) does n ot create any value to acquirers' shareholders, regardless of type and deal char acteristics.