Research Method and the Long‐Run Perfor Mance of Acquiring Firms

Abstract

The long‐run perfor Mance of successful bidders in a takeover has been controversial. We assess their long‐run perfor Mance by controlling for survival, firm size, and measurement bias in return cumulation. Measures of the perfor Mance of acquiring firms relative to control firms are sensitive to survival constraints implicit in the sampling process and to share return characteristics empirically associated with trading frequency In the pre‐bid and bid periods, the strong share market perfor Mance of acquiring firms masks the bias; it is more salient after the bid. Controlling for survival mitigates the new‐listing and delisting biases in the pre‐ and post‐bid periods.