Investigating the correlation of the short-term with the long-term stock valuation in the event of merger and acquisitions (M&A) announcement: the case of United States of America from 1985 to 2000

Abstract

Objectives

In this research, I analyze stock prices of both the target and acquirer firms in different periods, short- and long-run, to confirm two objectives:

1) Confirm a correlated relationship between stock prices in the short- and the long-term.

2) Identify the strength of the relationship through measuring the correlation between them.

Summary

The paper investigates the possibility that fluctuation of stock prices of the target and the acquiring firms in the short-run influence the valuation in the long-run. The research extracts key trends in mergers and acquisitions and data from transactions from 1985 to 2000 in the United States.

Conclusions

The findings of this research confirm the existence of the relationship between the stock prices in the short- and long-run and use correlation as the measurement method.