Abstract

Small bidders are found to be consistently better rewarded by the market at the announcement of mergers and acquisitions. They obtain significant positive gains, while large bidders register negative or close to zero absolute and relative abnormal returns. This is hypothesized to be due to the differences in the M&A motives, informational asymmetry and more efficient use of operational capacities. It is found that small bidders mostly engage into value creating transactions, in contrast to large ones that often erode shareholder's value. There is no confirmation of a large correction in the informational asymmetry for small bidders, explanatory of the higher announcement abnormal returns. Actually, there is no evidence of significant changes in either the quantity or the quality of the information provided by the analysts around the announcement of the event, regardless of the size of the bidder. As about the changes in operational performance that occur after the completion of the transaction, there are no large or strongly significant differences between the bidders of different sizes that would justify the large differential in the abnormal returns. This fact indicates that the high announcement valuation of small bidders does not reflect the operational synergy potential of the transaction, considered one of the most important in financial research.