DO LONG-TERM SHAREHOLDERS BENEFIT FROM CORPORATE ACQUISITIONS

Using 947 acquisitions during 1970-1989, this article finds a relation ship between the postacquisition returns and the mode of acquisition a nd form of payment. During a five-year period following the acquisitio n, on average, firms that complete stock mergers earn significantly ne gative excess returns of -25.0 percent whereas firms that complete cas h tender offers earn significantly positive excess returns of 61.7 per cent. Over the combined preacquisition and postacquisition period, tar get shareholders who hold on to the acquirer stock received as payment in stock mergers do not earn significantly positive excess returns. I n the top quartile of target to acquirer size ratio, they earn negativ e excess returns.