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Mergers, on average, lead to abnormal returns of 15% for the target when the deal is announced, and abnormal returns of 0% for the acquirer
Mergers, on average, lead to abnormal returns of 15% for the target when the deal is announced, and abnormal returns of 0% for the acquirer when the deal is announced. Assume that managers are rational (i.e. not inclined to hubris), unbiased, and strictly looking to maximize shareholder wealth. Explain why a manager might decide to acquire another firm given the above information on merger announcement returns.
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