Shareholder wealth effects of M&A withdrawals

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

This paper provides evidence on the wealth effect in the event of the withdrawal of a merger or acquisition, and the impact of termination fee provisions on acquirer withdrawal returns. I report a significant negative correlation between acquirer withdrawal returns and announcement returns, consistent with the theory of managerial learning in M&As. Target firms reap net gains in deal withdrawals, showing evidence of a permanent revaluation of targets even if the deals fail. I also find that acquirer termination fee provisions are positively associated with acquirer withdrawal returns, suggesting that such provisions may play a disciplinary role in the withdrawal decision-making and protect acquirer shareholders’ interests in deal withdrawals. Furthermore, my results also show that target termination fee provisions are negatively associated with acquirer withdrawal returns,which supports the efficiency hypothesis.
Original languageEnglish
Pages (from-to)681-716
JournalReview of Quantitative Finance and Accounting
Issue number3
Early online date11 Apr 2018
Publication statusPublished - 1 Apr 2019

Keywords / Materials (for Non-textual outputs)

  • mergers and acquisitions
  • withdrawal
  • abnormal return
  • termination fee


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