Department/School

Finance

Date of this version

4-2015

Document Type

Article

Keywords

Mergers; acquisitions; network; centrality; returns

Abstract

We hypothesize that the more central a firm in the customer-supplier network the lower is its returns from an acquisition. We find that the acquirers’ announcement day abnormal returns decline if the acquirer is more central in the network. Additionally, the target’s premiums decline if the target is more central in the network. Lastly, we also find that conditioned on the acquirer’s centrality, the acquirer’s announcement day abnormal returns increase if more information is available about the target. The centrality of the firm represents information availability of the firm. Thus, information availability may lead to a decline in acquisition returns.

Published in

Review of Quantitative Finance and Accounting

Citation/Other Information

44 (3) 393-423

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