Evidence from share price returns suggests that acquisitions destroy value. On the other hand, evidence from accounting measures of performance suggests that acquisitions give rise to synergies and therefore potentially create value. In this paper, we first revisit the UK evidence using an updated sample, and confirm that these findings still hold, and importantly hold in the period following the introduction of FRS10. We then reconcile the (apparently conflicting) findings from these market-based and accounting-based approaches. Using accounting measures of performance, we confirm the presence of synergies developed during acquisitions. Finally we show that post-acquisition abnormal returns are associated with news of synergistic benefits conveyed in the financial statements.

Despite its limitations, the CAPM is a popular asset pricing model. However, the estimation of beta in the CAPM is affected by the choice of the returns frequency and firm characteristics. This study undertakes a detailed examination of the evidence for the UK and we find that the differences in beta computed from returns of various frequencies are related to size, liquidity, book-to-market and to some degree, opacity factors. One area where our conclusions might have important implications is in the regulatory use of the CAPM. Our results imply that low frequency beta estimates should, in most cases, be preferred to high frequency beta estimates.