Acquiror Size, Acquisition Announcement Returns, and Periods of Financial Distress

Abstract

This thesis studies the relationship between acquiror size and acquisition announcement returns with the objective of assessing whether the negative size effect found in previous studies holds in the Nordic M&A markets as welI. Additionally, I provide new insights on the possible explanations behind this phenomenon. I examine a sample of 1,425 acquisitions by public Nordic companies from 2000 to 2022 and find an average abnormal announcement return of 3.1%. However, large acquirors gain 5.7% lower average abnormal announcement returns than small acquirors. The size effect is robust to firm and deal characteristics and holds irrespective of the form of financing or the organizational form of acquired assets. The evidence on possible explanations behind the size effect aligns most convincingly with equity and growth signaling theories. As for the crises, this study does not find conclusive evidence on reversed size effect during periods of financial distress.