Antonio Roma
DEPS, USiena
Costanza Consolandi
Dipartimento di Studi Aziendali e Giuridici, Università di Siena
Abstract
This study explores the size effect in financial markets, focusing on how mergers, acquisitions, and other corporate transactions influence the returns of small versus large stocks. Employing a comprehensive dataset of U.S. listed companies from 1992 to 2021, which includes 51,780 events, this research improves upon previous methodologies by integrating detailed timing information on deal announcements and completions with stock size and return data. Our analysis shows that small stocks are often the targets of transactions that significantly enhance their returns, not limited to takeovers. We find that pre-announcement returns are consistently larger for small stocks, likely due to less analyst coverage, resulting in largely unanticipated deal news. The study deepens our understanding of the size effect, suggesting that deal-related dynamics are essential for analyzing performance variations across different stock sizes and contributing to discussions on market efficiency and the valuation effects of corporate actions
Keywords
takeovers, size effect, Fama-French, SMB factor
