For more than 450 tender offers made between 1963 and 1986, shareholders of acquiring firms on average experienced significant positive abnormal returns. In the 1980s, however, abnormal returns to acquiring firms were on average negative - although not significantly so. A number of possible explanations account for the negligible wealth effects to the acquiring firms' shareholders: 1. full wealth effects are disguised, 2. competition between alternative bidders ensures that any excess returns are earned by the targets, and 3. the acquisitions are indeed poor investment projects for the acquirers and the wealth effects accurately reflect this. By applying ordinary least squares regression analysis to the explanatory variables for the sample studied, the first 2 explanations were shown to be supported. As the target increases in size relative to the acquirer, the acquirer experiences a larger appreciation in its share price. Acquirer returns also are lower as a result of target management opposing a bid and the Williams Act and its amendments.
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