Withdrawals of mergers involving private targets

We find that the announced withdrawal of mergers involving private targets produces negative and significant valuation effects on the bidder's stock on average. This result is distinctly different from the valuation effects for merger withdrawals involving public targets. These unique results hold even when we control for the medium of payment and for other factors with multivariate models. The adverse effects of the withdrawal announcement are more pronounced when the merger proposal announcement was more favourable. This implies that the effect of withdrawn merger of a private target reflects a partial correction of the benefits that were previously anticipated when the merger was initially announced.