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LEVERAGE AND THE WEALTH GAINS FROM ACQUISITION PROGRAM ANNOUNCEMENTS
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Gurmeet Singh Bhabra 
, Harjeet S. Bhabra , Glenn Boyle
Abstract
We examine the market reaction to announcements of an intention to pursue a program of external acquisitions. Although the mean gain is positive, only firms with high Tobin’s q and low leverage experience significant abnormal returns. For firms with low q or high leverage, abnormal returns are zero. Moreover, the stock price reaction is an increasing function of q only for firms with low leverage. These results are consistent with the view that high leverage reduces the ability of a firm to take full advantage of profitable investment opportunities.
Keywords: Acquisition Programs, Tobin’s q, Leverage
How to cite this paper: Bhabra, G. S., Bhabra, H. S., & Boyle, G. W. (2010). Leverage and the wealth gains from acquisition program announcements. Corporate Ownership & Control, 8(1-2), 267-280. https://doi.org/10.22495/cocv8i1c2p2
