On average,stockholders in target firms earn higher returns from mergers than stockholders from acquiring firms.

Question

Quizplus · Accepted Answer

This is true. Studies have shown that target firms' stockholders typically earn higher returns because they receive a premium on their stock price when the firm is acquired. Acquiring firms' stockholders, on the other hand, may experience a decline in the stock price following the announcement of the merger due to potential risks and uncertainties associated with the deal.

On Average,stockholders in Target Firms Earn Higher Returns from Mergers