Reassessing the distribution of synergies in mergers and acquisitions:
Evidence from the Korean market based on monetary abnormal returns
DOI:
https://doi.org/10.51359/2594-8040.2026.270106Keywords:
mergers, acquisitions, synergiesAbstract
This study challenges the “conventional view” in Mergers and Acquisitions (M&A) literature, which typically suggests that target shareholders capture most, if not all, of the value created, while acquirers merely break even. Analyzing domestic Korean M&A transactions between 2009 and 2020, the research provides evidence that this perception is a byproduct of using percentage abnormal returns rather than monetary values. The study employs a standard event study methodology to estimate abnormal returns around announcement dates. Preliminary findings using percentage returns align with the conventional view: target returns are statistically positive, while acquirer returns are insignificantly different from zero. However, when these figures are converted into won using market capitalizations, a sharp reversal occurs. Through a “fraction methodology” that analyzes paired transactions, the results provide robust statistical evidence that acquirers capture approximately 80% of total synergies, outperforming targets by a ratio of 4 to 1 These findings illustrate that the traditional reliance on percentage metrics is structurally inadequate for capturing monetary distribution due to the relative size of acquiring firms. By providing a less complex, data-efficient framework, this research calls for a systematic re-evaluation of M&A motivations, specifically questioning the “hubris hypothesis”, which assumes value destruction for acquirers. The results point to a potential new paradigm for understanding wealth distribution in global financial markets.
The study employs a standard event study methodology to estimate abnormal returns around announcement dates. Preliminary findings using percentage returns align with the conventional view: target returns are statistically positive, while acquirer returns are insignificantly different from zero. However, when these figures are converted into won using market capitalizations, a sharp reversal occurs. Through a “fraction methodology” that analyzes paired transactions, the results provide robust statistical evidence that acquirers capture approximately 80% of total synergies, outperforming targets by a ratio of 4 to 1.
These findings suggest that the traditional reliance on percentage metrics is structurally inadequate for capturing monetary distribution due to the relative size of acquiring firms. By providing a less complex, data-efficient framework, this research calls for a systematic re-evaluation of M&A motivations, specifically questioning the “hubris hypothesis” (Roll, 1986) which assumes value destruction for acquirers. The results establish a potential new paradigm for understanding wealth distribution in global financial markets.
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