Short-term shareholder value in real estate acquisitions

: an empirical event study of U.S. and European acquiring firms

Abstract

This study examines the short-term stock market reaction to merger and acquisition (M&A) announcements in the real estate sector, focusing on acquiring firms in both the United States and Europe. Using a standard event study methodology, cumulative abnormal returns (CARs) are calculated across multiple event windows to assess whether M&A announcements create or destroy shareholder value. Based on a sample of 56 real estate transactions, including a U.S.- only subsample of 42 deals, the results show consistently negative and statistically significant abnormal returns for acquirers, with the strongest effect observed in the [-2, +2] window. Cross- sectional regression analysis reveals that only the pre-announcement stock price run-up significantly explains CAR variation, suggesting that market expectations play a key role in shaping investor reactions. The findings are consistent with Moeller, Schlingemann, and Stulz (2005), who report similar value destruction for acquiring firms in a broad U.S. sample. Notably, this study finds a more pronounced negative reaction in the real estate sector, with a CAR of -1.7% for U.S. acquirers, compared to -1.0% in Moeller et al., highlighting the sector- specific challenges of real estate M&A such as valuation uncertainty and integration risks. Overall, the results suggest a persistent market skepticism toward acquisition announcements, underscoring the importance of transparent communication and strategic discipline in deal-making.

Date of Award	23 Jun 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	António Martins (Supervisor)