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Title: A comparative analysis of the market-based and accounting-based performance of diversifying and non-diversifying acquisitions in Hong Kong
Authors: Cheng, LTW 
Leung, TY
Keywords: Acquisitions
Long-term performance
Issue Date: 2004
Publisher: Pergamon Press
Source: International business review, 2004, v. 13, no. 6, p. 763-789 How to cite?
Journal: International business review 
Abstract: This paper investigates the short-term return performance and long-term operating performance of 36 partial mergers in Hong Kong during the period 1984-1996. We first conduct an event-study to evaluate the short-term market performance of the target, the bidder and a simulated combined portfolio consisting of both firms involved in the acquisition. The second method provides long-term performance indicators based on composite indices created from key financial ratios. The results of the event-study indicate that there are immediate share price gains to the target, acquiring and combined firms around the time the acquisition is announced. However, the long-term accounting-based performance analysis does not show a significant improvement in the 2 years following the acquisition for both the target and acquiring firms. No correlation is found between the short-term returns and the long-term performance indicators. These findings support the more recent literature on the potential benefits of diversification, and the view that diversifying acquisitions perform better than related acquisitions.
ISSN: 0969-5931
DOI: 10.1016/j.ibusrev.2004.09.003
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