Target firms in a merger or acquisition process realize,on average,
A)significantly positive per share price premiums.
B)significantly negative per share price reductions.
C)no significant change in price.
D)unknown returns.This is an unanswered research question.

Question

Quizplus · Accepted Answer

Research and empirical evidence suggest that target firms typically experience significant positive per share price premiums in a merger or acquisition process. These premiums are usually offered by the acquiring company to entice the target company's shareholders to sell their shares. Therefore, option A is the best choice. Option B is incorrect because it suggests negative price reductions, which is unlikely to happen in a merger or acquisition process. Option C is also unlikely because mergers and acquisitions typically involve significant changes in the target firm's operations, strategy, and ownership that tend to affect the stock price. Option D is incorrect because there is a considerable body of research and evidence that has explored the returns of target firms in M&A deals.

Target Firms in a Merger or Acquisition Process Realize,on Average