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An analysis of high-tech mergers during the dotcom bubble


An analysis of high-tech mergers during the dotcom bubble

Kamath, Reena (2005) An analysis of high-tech mergers during the dotcom bubble. Masters thesis, Concordia University.

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The S&P500 index rose by an average of 26% per year between 1995 and 1999, while the tech-dominated NASDAQ composite index earned returns of approximately 42% per year. Subsequently, in 2000, the market index fell by almost 11%; at the same time, the NASDAQ fell by about 41%. These changes reflect the way in which investors perceived high-tech firms as highly performing firms to be targeted by acquiring firms. In this paper, I examine the performance of bidders acquiring high-tech targets. First, I find positive abnormal returns for the bidders during 1996-2003. Using the market model and a control-firm approach, I find that abnormal returns were higher before the stock market crash of 2000. Second, I determine the relation between the characteristics of bidders and their excess returns. A positive relationship between managerial ownership and abnormal returns is observed. Third, I study the changes in the accounting-based performance measures of the bidders, and find that high-tech acquisitions completed before the crash were accompanied by poor post-acquisition performance, over a one-year comparison window. Finally, I also find evidence that cash-rich bidders acquired high-tech targets to seize growth opportunities, and as a result, earned high abnormal returns. Overall, my results suggest that investors were overoptimistic about the future performance of high-tech mergers, but have lowered their expectations over time

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:Kamath, Reena
Pagination:vii, 71 leaves : ill. ; 29 cm.
Institution:Concordia University
Degree Name:M. Sc. Admin.
Program:John Molson School of Business
Thesis Supervisor(s):Basu, Nilanjan
Identification Number:HC 79 H53K35 2005
ID Code:8219
Deposited By: Concordia University Library
Deposited On:18 Aug 2011 18:18
Last Modified:13 Jul 2020 20:03
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