The Desire to Acquire and IPO Long-Run Underperformance

We analyze a sample of 4,795 IPOs that went public between 1985 and 2003 to determine the impact of acquisition activity on long-run stock performance. After controlling for relevant factors, we find that IPOs that acquire within a year of going public significantly underperform for three-year holding periods following the first year, whereas non-acquiring IPOs do not significantly underperform…