Do Acquirers’ Stock Prices Fully React to the Acquisition Announcement of Listed vs. Unlisted Target Firms? Out-of-Sample Evidence from Spain

This note examines whether prices fully reflect value creation or destruction at the time of the acquisition announcement when samples are split into listed and unlisted target firms as previous international results are ambiguous about this subject. We find that the Spanish market fully react to the acquisition announcement (showing value creation only for unlisted target firms acquisitions), except for the smallest bidders of public targets since we find significant positive abnormal returns for a 24-month post-acquisition window when event portfolio returns are computed equally-weighted but insignificant abnormal returns when value-weighted returns are computed. This evidence is consistent with investors extrapolating large acquirers of public firm performance to smaller ones and, therefore, only identifying value creation in the long term