The performance of reit acquirers in the post-merger period

Abstract

Mergers and acquisitions (M&As) are a feature of modern economies. How-ever, research on conventional bidding firms in M&As has shown, on average, shareholders are worse off in the long-run (Alexandridis, Mavrovi-tis, and Travlos, 2012). We examine the long-Term post-merger performance of U.S. equity real estate investment trusts (REITs) to see whether this un-derperformance extends to the largest REIT sector in the world. In contrast to the earlier REIT data samples used by Campbell, Giambona, and Sir-mans (2009), we find, prior to the macroeconomic event of the financial crisis, that existing share-holders of bidding firms earn significant and posi-tive abnormal returns. This outcome supports the synergy motive for M&As in the REIT sector. Re-sults from announcements occurring after the on-set of the financial crisis show signs of negative and significant abnormal returns, suggesting these M&As were driven by the agency and/or hubris motive.