The Impact of Acquisitions on Operating Performance: Some Australian Evidence Divesh S. Sharma and Jonathan Ho* 1. INTRODUCTION Capital market studies examining the performance of firms involved in acquisitions posit that the market will impound anticipated operating performance gains in the share price of the target firm during the announcement period. Empirical evidence of this proposition manifesting in target firm shareholders' enjoyment of abnormal returns following a takeover announce- ment abound in the literature. Jensen and Ruback (1983) and Jarrell, Brickley and Netter (1988) comprehensively review this literature, particularly US studies, Gregory (1997) reviews UK studies and Bishop, Dodd and Officer (1987), Casey, Dodd and Dolan (1987) and Bugeja and Walter (1995) review Australian evidence. However, acquiring firms' shareholders are not as fortunate as target firms' shareholders. For example, Langetieg (1978), Firth (1979), Asquith (1983), Magenheim and Mueller (1988), Limmack (1991) and Gregory (1997) report negative returns for acquiring firms while Mandelker (1974), Bradley and Journal of Business Finance & Accounting, 29(1) & (2), January/March 2002, 0306-686X ß Blackwell Publishers Ltd. 2002, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA. 155 * The authors are respectively Associate Professor at the Nanyang Business School, Nanyang Technological University, Singapore; and Graduate Student at the School of Accounting, Banking & Finance, Griffith University, Australia. This paper has benefited from the comments of the anonymous referee, Professor Allan Hodgson (Griffith University) and participants at the 1998 European Accounting Association Conference (Antwerp, Belgium). Funding support from the Faculty of Commerce & Management and the School of Accounting, Banking & Finance, Griffith University, is kindly appreciated. (Paper received November 1999, accepted January 2001) Address for correspondence: Divesh S. Sharma, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798. e-mail: ADivesh@ntu.edu.sg