The (Missing) Relation between Acquisition Announcement Returns and Value Creation
Abstract
ABSTRACT Cumulative abnormal returns (CARs) computed around acquisition announcements are widely considered to be market‐based assessments of expected value creation. We show, however, that announcement returns do not correlate with commonly used and new measures of ex post outcomes. A simple characteristics‐based model using standard information known at the announcement date can predict these outcomes reasonably well, yet CAR even fails to capture the predictions from this model. Evidence suggests that information about the stand‐alone acquirer dominates CAR, making it virtually impossible to extract deal‐related information. We conclude that CAR is an unreliable measure of expected value creation.
Fields of Study & Subjects
Auditing
Earnings Management
Governance
Financial Reporting and Valuation Research
Corporate Finance and Governance
Publication details
- Journal / source
- The Journal of Finance
- Publisher
- Wiley
- Volume
- 81
- Issue
- 3
- Pages
- 1265–1320
- Publication date
- 7 April 2026
- Language
- EN