Around the announcement date of a merger,acquiring firm shareholders normally earn
A) 30% positive abnormal returns
B) -20% abnormal returns
C) Zero to slightly negative returns
D) 100% positive abnormal returns
E) 10% positive abnormal returns

Question

Quizplus · Accepted Answer

Acquiring firm shareholders normally earn zero to slightly negative returns around the announcement date of a merger. This is because of the uncertainty associated with the success of the merger and the potential for overpaying for the target company.

Around the Announcement Date of a Merger,acquiring Firm Shareholders Normally