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 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.

A Study of Wealth Effects of Takeover Announcements in India on Target Company Shareholders

2013 ◽  
Vol 38 (3) ◽  
pp. 23-50 ◽  
Author(s):  
T Mallikarjunappa ◽  
Panduranga Nayak
Keyword(s):  
Strategic Alliances ◽  
Stock Price ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Wealth Effect ◽  
Market Model ◽  
Wealth Effects ◽  
Event Window ◽  
Target Company ◽  
The Impact

The business strategy of inorganic growth is carried out by companies by resorting to actions which prominently include mergers, takeovers, and strategic alliances. There is a rapid growth of both mergers and takeovers in India subsequent to the economic liberalization. The companies consider takeover activity as the quickest means of corporate growth to enhance their size and face the domestic and global competition. In spite of several decades of vast research, researchers have not come to the final conclusion on the wealth effect of announcements of takeovers on the shareholders of participating companies. While some studies justify takeover as a socially productive activity which creates value for the shareholders, others provide contrary evidences to show that they destroy value for the shareholders. In India, only some studies have analysed the impact of M&A announcements on the stock return performance of companies involved and there is lack of evidences on wealth effects on shareholders. Therefore, this paper assesses the impact of takeover announcement on the stock price performance of target companies by taking a sample of 227 companies which received takeover bids during 1998–2007. The stock price reaction is examined for a period of 61 days surrounding the bid announcement day employing standard market model. BSE- 200 index is used as a proxy for the market. The regression co-efficient and the constant terms are estimated over a period of 250 days (-280 to -31) and the statistical significance of the results of the study is determined by non-standardized and standardized abnormal return methods. Both raw returns and log returns are examined. Results of the study show that target company shareholders experience substantial and statistically significant cumulative average abnormal returns (CAARs) of 27-37 percent — 37 percent when raw returns are employed and 27 percent when log returns are employed. The conclusions remain unchanged irrespective of the testing procedure used (i.e., non-standardized or standardized abnormal returns method) and even for several shorter event window periods within a broader event window of 61 days. The results for target companies are consistent with the evidence of extant research that major benefits from M&As accrue to target company shareholders. The practical implication of the study is that there is a large and significantly positive wealth effect on the target company shareholders in response to the announcement of takeovers. Takeovers offer an opportunity to shareholders of target companies and general investors to make profits both in the period before and after the announcement of the takeover bid.

Strategic investment acquisitions performance in UK firms: the impact of managerial overconfidence

2019 ◽  
Vol 17 (1) ◽  
pp. 24-41 ◽  
Author(s):  
Nour Adel ◽  
Fadi Alkaraan
Keyword(s):  
Contextual Factors ◽  
Relative Size ◽  
Abnormal Returns ◽  
Market Model ◽  
Strategic Investment ◽  
Content Type ◽  
Cross Border ◽  
Industrial Sectors ◽  
Book To Market Ratio ◽  
The Impact

PurposeThis paper focuses on the influence of overconfident managers on strategic investment acquisitions performance, by investigating the influence of key contextual factors on acquirers’ returns of UK domestic and cross-border acquisitions during the period 2000-2009. In this study, particular attention has been paid to management attributes (frequent acquirers vs non-frequent acquirers); method of payment (cash vs non-cash deals); the geographic scope (domestic vs cross-border deals); the type of the target (public vs private); the industry scope; and the relative size.Design/methodology/approachAn event study is used to analyse domestic and cross-border acquisitions. The market model is used for estimating the acquirers’ abnormal returns of 1,133 domestic and cross-border acquisitions by UK firms between 1 January 2000 and 31 December 2009.FindingsThe findings reveal that acquirers with domestic targets have higher returns than cross-border targets. Infrequent acquirers generate higher returns from domestic and cross-border acquisitions than frequent acquirers. Further, acquirers that acquire domestic targets from different industrial sectors produce higher returns than acquirers with targets from the same sector. Acquirers with cash deals, private targets and high book-to-market ratio generate significant returns compared to acquirers with non-cash deals, low book-to-market ratio and public targets and that for domestic and cross-border deals. These results suggest that UK domestic and cross-border acquisitions are partially shaped by overconfident managers.Research limitations/implicationsThe study has a number of limitations, including the use of the market model, the data-collection process and the limited number of contextual factors. Future research may examine a number of avenues related to the current study, including incorporating the acquiring firms’ financial characteristics.Practical implicationsThe study provides a better understanding of the influence of contextual factors on the success and failure of strategic investment projects such as acquisitions. Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.Originality/valueResults of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.

scholarly journals Malaysian Acquiring Firms' Shareholders' Wealth Effect Following Cross-Border Acquisition

2017 ◽  
Vol 3 (2) ◽  
pp. 147-158
Author(s):  
Md. Mahadi Hasan ◽  
Yusnidah Ibrahim ◽  
Raji Jimoh Olajide ◽  
Mohd Sobri Minai ◽  
Md. Mohan Uddin
Keyword(s):  
Analysis Of Variance ◽  
Euclidean Distance ◽  
Abnormal Returns ◽  
Wealth Effect ◽  
Target Firm ◽  
Distance Method ◽  
Cross Border ◽  
Long Run ◽  
Acquiring Firms ◽  
The Impact

Purpose: The purpose of this study is to investigate long run shareholders' wealth effect (SWE) of Malaysian acquiring firms following cross-border acquisition (CBA). Methodology: Using buy-and-hold abnormal returns (BHAR) measure of SWE and Euclidean distance method for identifying matching firms, the study investigated 176 CBA deals of Malaysian acquiring firms for the years 2004-2015. Both parametric tests (such as conventional t-statistics, skewness adjusted t-statistics, bootstrapping skewness adjusted t-statistics and Multivariate of Analysis of Variance) and non-parametric statistical (such as Wilcoxon-Mann-Whitney test) tools were employed to analyze the data and test the hypotheses regarding the impact of CBA deals on acquiring firms' SWE. Results: The research found that the SWE of acquiring firms is significantly positive in the shorter period while negative or mixed in the longer period. Furthermore, SWE is found to be different across several groups: (i) Shariah-complaint status firms vs. conventional firms (ii) level of control in target firm (such as major vs. minor acquisitions), (iii) Diversifying acquisition (for example, related vs unrelated acquisition). However, SWE does not differ from industry to industry. Implications: This research presents unique empirical evidences related to long run SWE of Malaysian acquiring firms following CBA. The findings imply that CBA is more success in the longer period.

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.

AN ANALYSIS OF ABNORMAL RETURNS ASSOCIATED WITH STOCK SPLIT

2021 ◽  
pp. 1-14
Author(s):  
JYOTI PANDEY ◽  
VINAY KANDPAL ◽  
NEERAJ NAUTIYAL
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Stock Splits ◽  
Event Window ◽  
Stock Split ◽  
Secondary Information ◽  
The Impact

A stock split is when a company’s outstanding shares are divided into multiple shares by issuing more shares to current shareholders without eroding their stake’s value. The company typically takes these actions to increase liquidity and marketability, lower stock prices, attract new investors and so on. The purpose of this study is to examine the impact of stock splits on the stock returns during the study period. Companies listed on the Bombay Stock Exchange (BSE) and those included in the S&P BSE 500 Index are included in the stock split data. The study period covers 14 years, between 2008 and 2021. Market model event study methodology is being employed to analyze the average abnormal returns (AARs), cumulative abnormal returns (CARs) and cumulative AAR (CAARs) using an event window period consisting of 31 days ([Formula: see text]). The study is largely based on secondary information from the CMIE Prowess IQ Database and the official BSE website. The [Formula: see text]-test, mean and standard deviation were used to investigate the influence of stock split announcements on share prices and the performance of stock splits before and after the announcement. The study found that on ([Formula: see text]), ([Formula: see text]), ([Formula: see text]) and ([Formula: see text]) and on the day of the announcement ([Formula: see text]), the market reacted favorably with significant positive abnormal returns. On ([Formula: see text]) and ([Formula: see text]) days, however, there were significant negative abnormal returns. The null hypothesis is accepted as the CAR for the whole 31-day event window, which is 0.0221, with a [Formula: see text]-statistic of 1.692, which is insignificant.

scholarly journals Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India

2015 ◽  
Vol 40 (4) ◽  
pp. 435-443 ◽  
Author(s):  
Chanchal Chatterjee ◽  
Paromita Dutta
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Market Model ◽  
Share Repurchase ◽  
Open Market ◽  
Announcement Date ◽  
Event Date ◽  
Abnormal Stock Returns ◽  
Repurchase Announcements ◽  
The Impact

Executive SummaryThis article examines the impact of open market share repurchase announcements on stock returns in the Bombay Stock Exchange (BSE). The main objective is to examine whether share repurchase announcements under the open market route have any significant impact on the returns of the stocks traded in the BSE. The article covers the period from 2009 to 2013. For sample selection, two criteria were used: first, the firm should have been listed in the BSE for at least 28 trading days before the repurchase announcement date, and second, the firm should have all relevant data required by this study. A total of 95 repurchase announcements fulfilled these criteria. The analysis period extended from –28 to +28 trading days relative to the repurchase announcement date ( t = 0). The findings of the study will help us to understand how the market responds to share repurchase announcements in India and whether a firm actually benefits by repurchasing its own shares from the market.This study uses a standard event methodology based on an ordinary least squares market model with the aim of finding out whether repurchase announcements generate any abnormal return around the repurchase announcement date. While applying the market model for estimating the abnormal returns, the regression is estimated based on the stock return of the firm and market return of the previous 120 trading days. So, here the estimation window takes into account 120 observations. Using this, the expected returns are generated and then the abnormal returns are derived for the event window, 28 days prior to the event date and 28 days after the event date.The findings of the study indicate that share repurchase announcements do not necessarily generate abnormal stock returns in the Indian equity market unlike developed economies like the US, Canada, and Australia. The whole sample is further divided into various subsamples on the basis of firm size and size of repurchase. The subsample analyses reveal that smaller firms do not necessarily experience higher abnormal stock returns following repurchase announcements than that of the larger firms. The findings weakly support the view that larger repurchase size generates greater abnormal stock returns than the smaller ones.

Do Demerger Announcements Impact Shareholders Wealth? An Empirical Analysis Using Event Study

2018 ◽  
Vol 22 (1) ◽  
pp. 22-31
Author(s):  
P. A. Padmanabhan
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Abnormal Returns ◽  
Corporate Restructuring ◽  
Market Model ◽  
Extensive Literature ◽  
Event Window ◽  
Increasing Trend ◽  
Indian Stock Market ◽  
The Impact

Corporate restructuring has been on an increasing trend in India over the past two decades, and demergers are emerging as one of the important forms of corporate restructuring. While there is extensive literature on demergers abroad, there is limited literature on demergers in the Indian context. In this study, the impact of demerger announcements on shareholders’ wealth is analysed using event study. Demerger announcements made by 63 companies spread over 11 years from 2003 to 2014 are taken up for the study. Two different models, namely, mean-adjusted returns model and market model, are applied. Log returns are used in the study. The efficiency of the Indian stock market is also tested in the study. The results show positive abnormal returns during the event window under both mean-adjusted returns model and market model. The results also indicate that the Indian stock market exhibits semi-strong form efficiency.

scholarly journals Impact of Dividends on Share Price Performance of Companies in Indian Context

2013 ◽  
Vol 4 (1) ◽  
pp. 4 ◽  
Author(s):  
Kavita Chavali ◽  
Nusratunnisa .
Keyword(s):  
Stock Price ◽  
Abnormal Returns ◽  
Share Price ◽  
Market Model ◽  
Indian Context ◽  
Announcement Date ◽  
Price Performance ◽  
Dividend Announcements ◽  
Study Methodology ◽  
The Impact

The study aims at finding the impact of dividends (cash and stock) on share price performance of companies in the Indian context. A sample of 67 fast moving consumer goods companies who made dividend announcements from April 2007 to August 2011 are taken. In this study, the Market Model Event Study Methodology has been employed to measure the effect of dividend announcements and its impact on the share price with a 41-day event window is taken. The stock price data is collected for 20 days prior to the dividend announcement, the share price on the announcement date (<em>An date</em>) t<sub>0</sub> and 20 days post the dividend announcement. The findings indicate that the market is found to react positively to dividend announcements and with a significantly positive Average Abnormal Returns (AAR) around the announcement date.

The Impact of Monetary and Fiscal Policies on the Stock Market in the United States (U.S); Evidence from Linear ARDL Framework

2020 ◽  
Vol 11 (1) ◽  
pp. 132-132
Author(s):  
Aref Emamian
Keyword(s):  
United States ◽  
Stock Market ◽  
The United States ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Fiscal Policies ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
The Impact

This study examines the impact of monetary and fiscal policies on the stock market in the United States (US), were used. By employing the method of Autoregressive Distributed Lags (ARDL) developed by Pesaran et al. (2001). Annual data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, the results show that both policies play a significant role in the stock market. We find a significant positive effect of real Gross Domestic Product and the interest rate on the US stock market in the long run and significant negative relationship effect of Consumer Price Index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Keywords: ARDL, monetary policy, fiscal policy, stock market, United States

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