Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323468 
Year of Publication: 
2025
Citation: 
[Journal:] Journal of Business Economics [ISSN:] 1861-8928 [Volume:] 95 [Issue:] 2 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2025 [Pages:] 427-463
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
This paper confirms the positive empirical relationship between CAPM-implied target asset betas and bidder announcement returns originally documented by Dessaint et al. (Rev Financ Stud 34(1):1–66, 2021) for U.S. takeover bids. We successfully replicate the main regression results qualitatively for the original and an extended sample period. However, the relationship is statistically insignificant in the European market for corporate control, although it appears to be economically meaningful. Additional tests indicate that bidder announcement returns are only related to target asset betas during merger waves and in horizontal mergers and acquisitions. These findings suggest that the relationship between target asset betas and bidder announcement returns is not driven by a CAPM-induced misvaluation of target firms. Therefore, recommendations to abandon the CAPM for capital budgeting decisions do not seem warranted.
Subjects: 
Mergers & acquisitions
CAPM
Capital budgeting
Valuation errors
JEL: 
G14
G31
G34
G41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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