The Effect of Corporate Acquisitions on Stockholder Returns in the Lodging Industry

Linda Canina
2000 Journal of Hospitality Financial Management  
Canina, L. (2000) . The effect of corporate acquisitions on stockholder returns in the lodging industry [Electronic version]. Retrieved [insert date], from Cornell University, SHA School site: Abstract We examine the stock market's reaction to merger announcements in the lodging industry over the 1982-2000 period. Unlike the results for the overall market, we find that both the stockholders of the acquiring and target firms gain at the time of the merger announcement. In the lodging industry,
more » ... rgers are positive net present value investments for bidders. Whereas for the overall market, merger bids are at the best zero net present value investments. In addition, we found that shareholders benefit from mergers in the short-(one year), medium (three year) and long-term (five-year). Lastly, the wealth gains to tender offers and significantly greater than the wealth gains to mergers for both the portfolio of target and acquiring firms. Keywords mergers and acquisitions, hospitality industry, portfolio, takeover, stocks Disciplines Finance and Financial Management | Hospitality Administration and Management Comments Required Publisher Statement Abstract We examine the stock market's reaction to merger announcements in the lodging industry over the 1982-2000 period. Unlike the results for the overall market, we find that both the stockholders of the acquiring and target firms gain at the time of the merger announcement. In the lodging industry, mergers are positive net present value investments for bidders. Whereas for the overall market, merger bids are at the best zero net present value investments. In addition, we found that shareholders benefit from mergers in the short-(one year), medium (three year) and long-term (five-year). Lastly, the wealth gains to tender offers and significantly greater than the wealth gains to mergers for both the portfolio of target and acquiring firms. Rjit is the log price relative for firm j , event i and day t, N" is the number of trading days in the estimation period for event z, company j . The unexpected or excess return is calculated for each day, t, in the event period, by event, z, by company j . It is defined as the actual daily return minus the expected return. 8 See Brown and Warner [1980, 1985] for a detailed explanation of event study methodology.
doi:10.1080/10913211.2000.10653740 fatcat:px7catnw2zfcdgfrrvkgfodp2y