scholarly journals Do Chinese M&A activities create shareholder value in the short run? Evidence from Chinese-German cross-border takeovers

2020 ◽  
Vol 2 (2) ◽  
pp. 33-46
Author(s):  
Jing Wang ◽  
Michel Charifzadeh ◽  
Tim Alexander Herberger
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Shareholder Value ◽  
Abnormal Returns ◽  
Information Leakage ◽  
Market Model ◽  
Cross Border ◽  
Acquiring Firms ◽  
Short Run ◽  
Value Effect

Our paper investigates the response of acquiring firms’ stock returns around the announcement date in cross-border mergers and acquisitions (M&A) between listed Chinese acquirers and German targets. We apply an event study methodology to examine the shareholder value effect based on a sample of M&A deals over the most recent period of 2012-2018. We apply a market model event study based on the argumentation of Brown and Warner (1985) and use short-term observation periods according to Andrade, Mitchell, and Stafford (2001) as well as Hackbarth and Morellec (2008). The results indicate that the announcement of M&A involving German targets results in a positive cumulative abnormal return of on average 2.18% for Chinese acquirers’ shareholders in a five-day symmetric event window. Furthermore, we found slight indications of possible information leakage prior to the formal announcement. Although it shows that the size of acquiring firms is not necessarily correlated with the positive abnormal returns in the short run, this study suggests that Chinese acquirers’ shareholders gain higher abnormal returns when the German targets are non-listed companies.

DO PRE & POST MERGER INTEGRATION MATTERS IN CROSS BORDER MERGER & ACQUISITION (CBM&A)

2020 ◽  
Vol 38 (2) ◽  
Author(s):  
Suman Talreja ◽  
Sajid Hussain Mirani ◽  
Jawaid Ahmed Ahmed Oureshi ◽  
Farhan Ahmed
Keyword(s):  
Abnormal Returns ◽  
The United States ◽  
Market Model ◽  
Event Window ◽  
Cross Border ◽  
Announcement Date ◽  
Acquiring Firms ◽  
Short Run ◽  
The Uk ◽  
The Impact

This study aims to assess the impact of deal size, value and firm-specific factors on the performance of UK acquiring firms from 2006 to 2016 in short-run. The event window methodology was used to analyze short run effects and standard market model was used to calculate abnormal and expected returns. Short event window was made from one day before the announcement of CBM&A to the one day after the announcement date of the event and from five days before the announcement date to the five days after the date of the announcement of the deal and similarly from ten days before the event was announced for ten days after the event was announced (-1, 1), (-5, 5) and (-10, 10) respectively. The study infers that the UK acquirers do not earn statistically significant positive abnormal returns in the short run. The uni variate analysis shows that the short-run performance of UK acquirers is influenced by acquisition strategy, and the payment methods. After the fifth merger wave, international deals in merger and acquisition along with cross border deals started, which created the value for the economy as well. Since 1985, several deals have been done in the United States and the United Kingdom. This research paper is intended to provide empirical evidence on recent data of CBM&A transactions of the UK acquiring firms. The present study is a indispensable for the firms seeking cross border deals and fills the gap in the existing literature.

scholarly journals Event Study on the Reaction of Stock Returns to Acquisition News

2017 ◽  
Vol 4 (1) ◽  
pp. 33 ◽  
Author(s):  
Fotoh Lazarus Elad ◽  
Nko Solange Bongbee
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Null Hypothesis ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Critical Value ◽  
Market Model ◽  
Test Statistics ◽  
Publicly Traded ◽  
Simple Regression

This study examines the reaction of stock returns to acquisition news. A data of 51 observations of acquiring companies with publicly traded shares on the London Stock Exchange (FTSE100) is used over a period, from July 2012 to May 2013 with an estimation period [-100, -10] and test period [-5, +5]. The market model is applied here in order to predict future stock returns and the use of the simple regression to get the parameters of the regression equation. With this a test statistics obtained on average, is significantly positive and greater than the critical value. Therefore, the event of acquisition does appear to be related significantly to the abnormal returns and the null hypothesis being rejected.

The announcement and implementation reaction to China's margin trading and short selling pilot programme

2014 ◽  
Vol 10 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Saqib Sharif ◽  
Hamish D. Anderson ◽  
Ben R. Marshall
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Short Selling ◽  
Market Model ◽  
Short Sales ◽  
Content Type ◽  
Pilot Programme ◽  
The Impact

Purpose – The purpose of this paper is to investigate how the announcement and implementation of short sales and margin trading regulation affects Chinese stock returns and trading volume. On 31 March 2010, the Chinese regulators launched a pilot programme, allowing short sales and margin trading for 50 Shanghai Stock Exchange and 40 Shenzhen Stock Exchange stocks. Design/methodology/approach – This paper uses an event study approach to compare market model abnormal returns (ARs) of the pilot firms with two distinct matched firm samples. A volume event study is also conducted to examine abnormal trading activity surrounding the key events in the pilot stocks. Findings – Negative ARs follow both the announcement and implementation of short selling and margin trading. This suggests the negative impact of short sales dominates the positive impact of margin trading on an average. Volume also declines, which is consistent with uninformed investors’ seeking to avoid trading against informed traders. Originality/value – The paper appears to be the first to address the impact of both the announcement and implementation of short selling and margin trading rule changes on returns and liquidity using individual stock data.

scholarly journals Valuation effects of cultural disparity on cross border mergers: The evidence from India

2019 ◽  
Vol 8 (4) ◽  
pp. 21-40
Author(s):  
Manish Tewari ◽  
Pradip Banerjee ◽  
Soumen De
Keyword(s):  
Cultural Distance ◽  
Abnormal Returns ◽  
Business Group ◽  
Cross Sectional ◽  
Valuation Effects ◽  
Cross Border ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
Acquiring Firms ◽  
Short Run

The object of this study is to explore the effect of cultural distance on both the long run and short run performance of cross border mergers and acquisitions undertaken by Indian acquiring firms. We utilize buy and hold returns (BHAR), cumulative abnormal returns (CAR) and cross-sectional regression analysis in our study. Adopting the traditional Hofstede measure of cultural distance and other pertinent variables, commonly used to measure cultural differences, we document a negative and statistically significant influence of cultural distance on Indian cross-border M&As and corroborate some of other findings reported in prior research. Also, we find that the BHAR is nevertheless higher when the acquisitions are friendly, paid for 100% cash, and the acquiring firm is large, older and belongs to a business group. The inclusion of the variable ‘business group’ along with industry relatedness and acquirer size provides valuable insights into the Indian cross border acquisition landscape, wherein business groups dominate to a great extent.

scholarly journals Conteúdo Informacional dos Ratings de Crédito no Brasil: Um Estudo de Evento

2013 ◽  
Vol 11 (4) ◽  
pp. 503 ◽  
Author(s):  
Flávia Cruz de Souza Murcia ◽  
Fernando Dal-Ri Murcia ◽  
José Alonso Borba
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Credit Rating ◽  
Abnormal Returns ◽  
Bad News ◽  
Market Model ◽  
Stock Market Reaction ◽  
It Impacts ◽  
Standard And Poor's ◽  
Rating Downgrades

This study analyzes the effect of credit rating announcements on stock returns in the Brazilian market during 1997-2011. We conducted an event study using a sample of 242 observations of listed companies, 179 from Standard and Poor’s and 63 from Moody’s, to analyze stock market reaction. Abnormal returns have been computed using the Market Model and CAPM for three windows: three days (-1, +1), 11 days (-5, +5) and 21 days (-10, +10). We find statistically significant abnormal returns in days -1 and 0 for all the three types of rating announcement tested: initial rating, downgrades and upgrades. For downgrades, consisted with prior studies, our results also showed negative abnormal returns for all practically all windows tested. Overall, our findings evidence the rating announcements do have information content, as it impacts stock returns causing abnormal returns, especially when they bring ‘bad news’ to the market.

New product announcement: spokesperson a manifestation of increasing firm value

2018 ◽  
Vol 13 (6) ◽  
pp. 1635-1655
Author(s):  
Bikram Jit Singh Mann ◽  
Sonia Babbar
Keyword(s):  
Event Study ◽  
Firm Value ◽  
Source Credibility ◽  
Shareholder Value ◽  
Abnormal Returns ◽  
New Product ◽  
Content Type ◽  
Study Methodology ◽  
The Impact

Purpose Before introducing new products, companies make announcements regarding the launch of the product which influences stock market yields of the announcing companies. Information content of the new product announcement has never been an exclusive focused stream of research. Therefore, an assessment of the impact of the content characteristics of the new product announcement on the shareholder value and the impact of source credibility (spokesperson) in making such announcements is a major gap in the existing literature. The paper aims to discuss these issues. Design/methodology/approach First, the standard event study methodology has been employed on the sample to measure the abnormal gains/losses accruing to the announcing firms. Second, moderated regression analysis (MRA) is employed to identify the characteristics of the new product announcement and to check the role of the spokesperson in creating shareholder value. Findings The results of the event study indicate that the abnormal returns are generated during the new product announcement. The results of MRA disclose the variables having a positive and a significant influence on the effective returns of the announcing companies. Likewise, the role of the spokesperson has come out brightly as a credible communicator. Originality/value The research provides a direction to the announcing companies regarding the content of the announcement leading to a positive perception among the investing community. Likewise, it also provides direction to the investor community about the characteristics of the announcement content they give weight age in forming a perception of strength in evaluating the new product announcement, to which they are largely unaware.

scholarly journals Impact of Smoking Ban Fatwa on Indonesian Tobacco’s Company

2013 ◽  
Vol 2 (2) ◽  
pp. 76-86
Author(s):  
Gatot Soepriyanto ◽  
Paulina Santoso
Keyword(s):  
Event Study ◽  
Abnormal Returns ◽  
Tobacco Consumption ◽  
Share Price ◽  
Market Model ◽  
Smoking Ban ◽  
Muslim Population ◽  
Stock Market Return ◽  
Study Methodology ◽  
Event Study Methodology

The objective of this study is to assess the share price reactions to smoking ban fatwa on Indonesia tobacco’s company. We expect that the smoking ban fatwa in the world’s largest Muslim population will hit the tobaccos industry revenues, lower tobacco’s company profit and eventually affect the share price of those firms. We use event study methodology and standard market model to calculate abnormal returns of the tobacco’s firms related to the news of smoking ban fatwa. Our study failed to find a statistically significant effect of smoking ban fatwa on tobacco’s firm stock market return. It suggests that the investors do not see the fatwa as a factor that may control the tobacco consumption in Indonesia – thus it may not affect the tobacco’s firm revenues and profit in the future

The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rana Bayo Flees ◽  
Sulaiman Mouselli
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Content Type ◽  
Going Concern ◽  
Study Approach ◽  
Audit Opinions ◽  
The Impact ◽  
First Time

Purpose This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. Design/methodology/approach Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements. Findings The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model. Research limitations/implications The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient. Practical implications The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand. Originality/value This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Samta Jain ◽  
Smita Kashiramka ◽  
P. K. Jain
Keyword(s):  
Emerging Economies ◽  
Value Creation ◽  
Global Economy ◽  
Emerging Market ◽  
Research Work ◽  
Abnormal Returns ◽  
Content Type ◽  
Cross Border ◽  
Country Level ◽  
Acquiring Firms

PurposeThe global economy has witnessed an exponential increase in cross-border acquisitions (CBAs) by emerging market companies (EMCs), demanding a relook at their internationalization strategy. The purpose of the study is to investigate whether the announcement of CBAs by EMCs creates value for the equity-holders of acquiring firms and identify factors affecting the valuation of acquiring companies.Design/methodology/approachThe paper investigates the announcement impact of CBAs of CNX Nifty 500 Indian and SSE 380 Chinese companies. The event study analysis of 553 Indian and 125 Chinese acquisitions supports the contention that CBAs are indeed a strategic choice of EMCs for value creation.FindingsCBAs generate positive and statistically significant abnormal returns for shareholders of both Indian and Chinese acquirers. The markets, however, differ in terms of their motivations; country-level factors have been observed to exert significant influence on the returns of Indian acquirers. Indian companies experience larger value creation on acquiring firms established in developed, institutionally closer and/or economically distant markets. The findings support the asset-seeking motive of Indian companies.Originality/valueThe research work contributes to the evolving stream of CBAs literature with a focus on the globalization strategies of EMCs. The present study is a modest attempt to lay the foundation for a new theoretical framework (asset-seeking perspective) of overseas acquisitions from emerging economies. The existing studies on emerging economies have emphasized, in isolation, either Indian CBAs or international acquisitions by Chinese firms. Being so, the study is unique and original in the sense that it is a comparative study of India and China.

Do firms harvest from political connections during general elections? Case of Pakistan

2020 ◽  
Vol 27 (1) ◽  
pp. 258-273
Author(s):  
Ayesha Ashraf ◽  
M. Kabir Hassan ◽  
Khurram Abbas ◽  
Qamar Uz Zaman
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Share Price ◽  
Market Model ◽  
Political Connections ◽  
Content Type ◽  
Connected Group ◽  
Playing Field ◽  
General Elections ◽  
The Impact

Purpose This paper aims to examine the impact of general elections on the stock returns of the politically connected group affiliated firms of Pakistan. Design/methodology/approach This study uses the market model to assess the impact of political connections (PCs) on abnormal stock returns, before and after election events. We have used share price data of non-financial firms of Pakistan for the years 2008-2013. Findings It has been found that behavior of cumulative average abnormal returns (CAAR) is significantly different for standalone and politically connected group affiliated firms. The results reveal that CAARs of politically connected group affiliated firms have experienced less deviation as compared to stand alone firms. Therefore, it is argued that politically connected group firms may reduce the impact of political uncertainty on stock returns in comparison to stand alone firms. Practical implications This study is helpful for policy regulators of Pakistan to devise appropriate policies to maintain a level playing field for politically connected and standalone firms. Originality/value This study provides a new dimension to understand the role and association of PCs and general elections with stock markets returns.

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