3 OPERATING PERFORMANCE CHANGES FOLLOWING FASHION M&A ACTIVITY
29 3 OPERATING PERFORMANCE CHANGES FOLLOWING FASHION M&A ACTIVITY 3.1 INTRODUCTION A substantial part of the empirical research on M&A success focuses on short- term stock price reactions following transaction announcements. While most of these event studies find significantly positive abnormal returns to target share- holders, bidder stockholders gain abnormal returns that range very close around zero. Event studies that also calculate the value implications for combined enti- ties mostly find small positive abnormal returns and therefore conclude that M&A activity, on average, does create value for the parties involved. A smaller fraction of M&A research analyzes operating performance changes following corporate mergers based on accounting data. In many of such studies, acquiring firms significantly underperform peer group companies in the years after the transaction. This observation represents a clear contradiction to the average results of capital market-oriented event studies. It is therefore of great interest to determine the reasons and drivers of positive stock price reac- tions and eroding operating performance following corporate mergers. To compare these two success indicators it is appropriate to control for in- dustry specifics. The fashion and leather accessories industry has seen a tre- mendous degree of consolidation over the course of the previous decades. There are some unique characteristics that make an independent analysis of this parti- cular business segment worthwhile. First, due to their strong exposure to mostly two seasonal collections’ appreciation by their customers and the resulting very short product life cycles, especially small fashion companies face...
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