STOCKHOLDER RETURNS AMONG HOMOGENEOUS GROUPS OF MERGERS

A sample of cash and stock merger transactions consummated between 197 5 and 1987 is used to form homogeneous groups based on financial chara cteristics of both bidding and target firms. The results are used to d etermine how group heterogeneity with respect to financial characteris tics influences intergroup differences in both bidding firm and target firm merger returns. Stockholders of bidding firms with attributes th at fit the free cash flow hypothesis of merger motivation suffer wealt h losses relative to firms that have characteristics consistent with a chievement of scale or scope economies or financial synergies. Differe nces in target and merger portfolio returns are also found.