Motives in the Acquisitions of NASDAQ Targets During the Aftermath of the 1987 Crash

After the crash of 1987, the Nasdaq composite index stayed below the pre-crash level for nearly two years. Takeover activity surged in this after-crash period. We compare the motives in the acquisitions of Nasdaq targets during the after-crash period with those in the ten-year period before the crash. We find that the announcement period return to acquirers and the proportion of acquirers with positive gains declines in the after-crash period. For both the periods, agency is the motive for takeovers that have negative total gains (acquirer + target), but synergy and hubris are co-motives for takeovers that have positive total gains. The proportion of takeovers in which the managers of acquirers act against the interest of the shareholders increases after the crash