HORIZONTAL AND VERTICAL TAKEOVER AND SELL-OFF ANNOUNCEMENTS: ABNORMAL RETURNS DIFFER BY INDUSTRY

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Abstract

We begin with the hypothesis that shareholder-wealth effects of corporate transactions differ depending on (a) the specific industry, (b) whether they are horizontal or vertical, and (c) whether they are integrations (takeovers) or disintegrations (partial sell-offs). A standard event study analysis for cumulative abnormal returns based on the market model is conducted for 309 data-points from 227 transaction announcements. We find that abnormal returns indeed do significantly depend on the transaction profile (horizontal vs. vertical and integration vs. disintegration) and industry. One main result is the observation that the capital market shows distinctive preferences for either an integration or disintegration strategy for vertical as well as for horizontal transactions. The specific pattern of this preference differs according to industry.

Keywords: Horizontal and Vertical Transactions, Integration and Disintegration, Mergers and Acquisitions, Abnormal Returns, Industry Specific Event Study

How to cite this paper: Gross, S. K. H., & Lindstädt, H. (2006). Horizontal and vertical takeover and sell-off announcements: Abnormal returns differ by industry. Corporate Ownership & Control, 3(2), 23-30. https://doi.org/10.22495/cocv3i2p3