Relationship between merger gains and economic cycle

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Volume Title

School of Business | Bachelor's thesis

Date

2020

Major/Subject

Mcode

Degree programme

Rahoitus

Language

en

Pages

23 + 13

Series

Abstract

This thesis explores the effect economic cycle has on merger gains of public companies incorporated in the USA. Completed mergers announced from 1990 to 2019 with a value over $50M are subject to this study. The economic cycle is divided into two categories: normal or strong economy and weak economy, and the mergers are classified into said categories based on their announcement dates. The merger gains are measured as cumulative abnormal announcement returns and as three-year post-merger buy-and-hold abnormal returns. My results show that the mergers initiated during periods of weak economy have significantly weaker three-year post-merger performance compared to the ones initiated during good or normal economy. Results considering announcement returns are corresponding, but not as conclusive.

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Thesis advisor

Kokkonen, Joni

Keywords

mergers, merger gains, economic cycle, merger waves

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