Discussion paper
DP12830 Winning by Losing: Evidence on the Long-Run Effects of Mergers
We propose a novel approach to measuring returns to mergers. In a new data set of close
bidding contests we use losers' post-merger performance to construct the counterfactual
performance of winners had they not won the contest. Stock returns of winners and
losers closely track each other over the 36 months before the merger, corroborating
our approach to identi cation. Bidders are also very similar in terms of Tobins Q,
pro tability and other accounting measures. Over the three years after the merger,
however, losers outperform winners by 24 percent. Commonly used methodologies
such as announcement returns fail to identify acquirors' underperformance.
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