Market Perception of Defense Mergers in the United States: 1990-2006, A Case of Event Studies
Abstract
The purpose of this paper is to analyze whether or not there was a statistically significant reaction in financial markets to the announcements of U.S. defense contractor consolidations (mergers and acquisitions) from January 1990 to December 2006. This analysis is accomplished through the use of two series of event studies involving the top five defense contractors: Boeing, Lockheed Martin, General Dynamics, Raytheon, and Northrop Grumman. The first study employs arithmetic and the second study employs logarithmic returns against the S&P 500 index. Many studies have been conducted using the event study methodology, and the results have shown that in some cases stock prices do respond to new information. The assumption has been maintained that the market responds rationally to such announcements. In contrast, the announcements of the acquisition of publicly traded firms by other publicly traded firms have not always had a consistently significant beneficial effect on the shareholder wealth of the acquiring firms (Schipper & Thompson, 1983). The results of this case study further support the latter assertion and add to the body of research involving event studies.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 2007
- Accession Number
- ADA475824
Entities
People
- Jennifer L. Grant
Organizations
- Naval Postgraduate School