Title

Value, valuation, and the long-run performance of merged firms

Document Type

Article

Publication Date

2-1-2011

Abstract

We propose an alternative measure of the long-term economic impact of mergers on firm value: post-acquisition changes in intrinsic value. Consistent with the literature on post-acquisition returns, the intrinsic value of merged firms decreases on average in the three years following deal completion, especially for firms with high initial intrinsic values. The loss of intrinsic value is driven primarily by decreases in expected earnings. Finally, using return decompositions, we find evidence that the poor post-acquisition stock returns documented in other studies can be attributed primarily to lost intrinsic value rather than changes in valuation levels. © 2010 Elsevier B.V.

Publication Name

Journal of Corporate Finance

Volume Number

17

First Page

1

Last Page

17

Issue Number

1

DOI

10.1016/j.jcorpfin.2010.07.001

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