Acquisitions And Common Stock Returns In The Health Care Industry: 1982-1985

Abstract

Employing a methodology commonly used to determine the movement of stock returns around a specific event, we examined the movement of common stock returns of acquiring firms in the health care industry for three periods, 1982-1983, 1984, and 1985.  We find that in the 1982-1983 period, investors could expect negative excess returns from holding tock in acquiring firms in the health care industry.  In contrast, for the 1984 and 1985 periods we find no evidence of excel returns for investors.  The difference between the two periods, we believe, is due to the more competitive environment which existed in the industry in the latter two periods.