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JOURNAL OF ACCOUNTING AND FINANCE
Target Firm Characteristics: What Do Investors Value During Recessions?
Author(s): Christi Wann, Nai H. Lamb
Citation: Christi Wann, Nai H. Lamb, (2017) "Target Firm Characteristics: What Do Investors Value During Recessions?," Journal of Accounting and Finance, Vol. 17, Iss. 1, pp. 144-156
Article Type: Research paper
Publisher: North American Business Press
Abstract:
Prior merger and acquisition (M&A) literature assumes that investors respond to deal announcements in the same way, regardless of the business cycle. The results of this study provide unique insight into investor reactions to M&A activity during recessions when resources are constrained. The results show that target cumulative abnormal returns are 3.53% to 5.72% significantly higher during recessions than in non-recessions. During recessions, the market rewards target firms with smaller market capitalization, lower risk, and lower book-to-market ratios at premiums of 5.68%, 5.65%, and 7.26%, respectively over those earned in non-recessions.
