scholarly journals Stock Market Reactions to Financing and Payment Decisions for European Mergers and Acquisitions

2020 ◽  
Vol 4 (2) ◽  
pp. 41-89
Author(s):  
Wolfgang Bessler ◽  
David Kruizenga ◽  
Wim Westerman
Keyword(s):  
Stock Market ◽  
Mergers And Acquisitions ◽  
Abnormal Returns ◽  
Market Reactions ◽  
Valuation Effects ◽  
Payment Methods ◽  
Cumulative Abnormal Returns ◽  
Study Methodology ◽  
Acquisition Announcements ◽  
Stock Market Reactions

Aim: We analyze stock market reactions to merger and acquisition announcements for firms in Europe and contribute to the literature by providing empirical evidence how the decisions with respect to alternative financing sources (equity or debt) and the methods of payment (cash or stock) affect the magnitude of the valuation effects.   Research design: An event study methodology is applied to 717 M&A transactions. We analyze the size of the cumulative abnormal returns using the financing sources and payment methods and other variables as the relevant determinants.   Findings: The cumulative abnormal results suggest that target shareholders and bidder shareholders in private deals benefit from mergers and acquisitions. The effect found is centered around the announcement date, making our findings consistent with market efficiency. Debt financed deals outperform equity financed deals and cash paid M&A outperform stock paid M&As, due to information asymmetry, signaling and agency effects.   Originality: This study adds to our understanding of the relevance of the financing sources and the payment methods for mergers and acquisitions in Europe.   Implications: This study may help practitioners to better assess the valuation effects of alternative financing sources and payment methods when acquiring other firms.     JEL: G32, G34

scholarly journals Stock Market Reactions to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership’s Approval: Evidence from Vietnam

2021 ◽  
Vol 36 (3) ◽  
pp. 462-490
Author(s):  
Son Tung Ha ◽  
Thi Hong Hanh Pham ◽  
Thi Nguyet Anh Nguyen
Keyword(s):  
Stock Market ◽  
Abnormal Returns ◽  
Stock Exchanges ◽  
Market Returns ◽  
Market Reactions ◽  
Listed Firms ◽  
Stock Market Performance ◽  
Study Methodology ◽  
Stock Market Reactions ◽  
Event Study Methodology

We examine the stock market performance of Vietnam’s listed firms in response to the country’s approval of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Employing an event study methodology, we first calculate the abnormal returns of all listed Vietnamese firms around the CPTPP’s approval date. Then, we attempt to link these abnormal returns to firms’ characteristics. We find evidence that the announcement of the CPTPP’s approval is associated with positive abnormal returns for Vietnam’s listed firms. We also find considerable heterogeneity in the magnitude and pace of the impacts of the CPTPP’s approval on market returns across Vietnam’s two stock exchanges. However, we fail to reject the null hypothesis that the market did not react to the CPTPP’s approval at the sectoral level.

scholarly journals Stock Market Reactions to Pollution Information Disclosure: New Evidence from the Pollution Blacklist Program in China

2021 ◽  
Vol 13 (4) ◽  
pp. 2262
Author(s):  
Yalin Zhou ◽  
Jing Cao ◽  
Yujia Feng
Keyword(s):  
Stock Market ◽  
Information Disclosure ◽  
Abnormal Returns ◽  
Market Reactions ◽  
Cumulative Abnormal Returns ◽  
Green Finance ◽  
Stock Market Performance ◽  
Negative Effect ◽  
Stock Market Reactions ◽  
Polluting Firms

Public disclosure of environmental information has been widely used as an important instrument in green finance. In this paper, we examine a blacklist program of polluting firms and conduct an event study to evaluate how the stock market responds to the pollution news. Our results show that the pollution disclosure indeed had a significant negative effect on the stock market performance of listed companies on the blacklists, but only when the overall market was under downward shocks, suggesting that the shareholders were more sensitive to the pollution news in bad times. When the stock market performed well or was relatively stable, the blacklist effects were not evident. Our heterogeneity analyses further revealed that the magnitude of the cumulative abnormal returns depended on the firm size. That is, the larger the firms are, the less they suffer from the pollution news release. Our findings show that pollution disclosure does penalize the polluting firms through stock market response mechanisms.

Stock Market Reactions and Formula One Performance

2011 ◽  
Vol 25 (4) ◽  
pp. 305-313 ◽  
Author(s):  
Klaus Schredelseker ◽  
Fedja Fidahic
Keyword(s):  
Stock Market ◽  
Global Financial Crisis ◽  
Abnormal Returns ◽  
Market Reactions ◽  
Formula One ◽  
Study Methodology ◽  
The One ◽  
The Global Financial Crisis ◽  
Stock Market Reactions ◽  
Event Study Methodology

Due to the global financial crisis, the investments of car manufacturers are going to be revised as never before; especially this is the case for any kind of commitment in sport sponsoring. In Formula One on the one hand costs are exploding, on the other hand money becomes shortened. That is why it becomes interesting to know to what extent a manufacturer’s involvement in this sport is worth it. We use an event study methodology analyzing the stock market response after race performances from 2005 to 2007. Our main results: McLaren- Mercedes and Fiat-Ferrari generate positive abnormal returns after wins for DaimlerChrysler and Fiat, and significantly weaker abnormal returns after losses. Conversely, returns for Renault change in an opposite way.

Stock market reactions to voluntary integrated reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yuzuka Nakajima ◽  
Yushi Inaba
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Abnormal Returns ◽  
Integrated Reporting ◽  
Market Reactions ◽  
Content Type ◽  
Study Methodology ◽  
Stock Market Reactions ◽  
Voluntary Adoption ◽  
Event Study Methodology

Purpose This study aims to examine the impact of voluntary adoption of integrated reporting on the stock prices of firms in Japan. Design/methodology/approach The event study methodology was used to analyze the stock market reactions to voluntary integrated report (IR) publication. Abnormal returns were estimated for 1,602 observations of 490 firms publishing IRs in Japan using the market model. The t-test, the Boehmer et al., 1991 test and the generalized sign test examined the significance of the cumulative average abnormal returns (CAARs). Findings The study reveals that the stock market reacts positively to voluntary IR publication by firms, especially in 2019 and 2015. Additionally, it reveals a tendency for higher CAARs around IR publication dates than around corporate social responsibility report publication dates, especially in 2016 and 2015. Research limitations/implications The limitations of this study include the possibility of self-selection bias and omitted variable bias. Practical implications This study suggests that firms can earn higher abnormal returns in the stock market through environmental, social and governance (ESG) disclosure in IRs, corroborating the recently rising investor interest in voluntary integrated reporting in Japan. Originality/value This study contributes to the literature on the value relevance of voluntary adoption of integrated reporting by providing evidence of firms achieving significantly positive abnormal returns around voluntary IR publication dates. There is no published analysis on this topic using multitudes of sample firms using the event study methodology.

scholarly journals Profiting on the Stock Market in Pandemic Times: Study of COVID-19 Effects on CESEE Stock Markets

Mathematics ◽  
2021 ◽  
Vol 9 (17) ◽  
pp. 2077
Author(s):  
Tihana Škrinjarić
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Stock Markets ◽  
Trading Strategies ◽  
Eastern European ◽  
Negative Effects ◽  
Market Reactions ◽  
Study Approach ◽  
Study Methodology ◽  
Stock Market Reactions

This research deals with stock market reactions of Central Eastern and South Eastern European (CESEE) markets to the COVID-19 pandemic, via the event study methodology approach. Since the stock markets react quickly to certain announcements, the used methodology is appropriate to evaluate how the aforementioned markets reacted to certain events. The purpose of this research was to evaluate possibilities of obtaining profits on the stock markets during great turbulences, when a majority of the participants panic. More specifically, the contrarian trading strategies are observed if they can obtain gains, although a majority of the markets suffer great losses during pandemic shocks. The contributions to the existing literature of this research are as follows. Firstly, empirical research on CESEE stock markets regarding other relevant topics is still scarce and should be explored more. Secondly, the event study approach of COVID-19 effects utilized in this study has (to the knowledge of the author) not yet been explored on the aforementioned markets. Thirdly, based on the results of CESEE market reactions to specific announcements regarding COVID-19, a simulation of simple trading strategies will be made in order to estimate whether some investors could have profited in certain periods. The results of the study indicate promising results in terms of exploiting other investors’ panicking during the greatest decline of stock market indices. Namely, the initial results, as expected, indicate strong negative effects of specific COVID-19 announcements on the selected stock markets. Secondly, the obtained information was shown to be useful for contrarian strategy in order to exploit great dips in the stock market indices values.

Stock market reactions to layoff announcements – analysis of the renewable energy sector

2017 ◽  
Vol 11 (2) ◽  
pp. 311-328 ◽  
Author(s):  
Stephan Kunert ◽  
Dirk Schiereck ◽  
Christopher Welkoborsky
Keyword(s):  
Renewable Energy ◽  
Stock Market ◽  
Capital Market ◽  
Abnormal Returns ◽  
Shareholder Wealth ◽  
Energy Sector ◽  
Market Reactions ◽  
Content Type ◽  
The Public ◽  
Stock Market Reactions

Purpose This study aims to analyze stock market reactions to layoff announcements in the renewable energy sector. The global renewable energy sector and most of the producers of wind and solar energy equipment are struggling. While changes in the regulation and in the promotion of energy production from renewable sources reduced the attractiveness of these technologies, many involved companies had to downsized their workforce to increase performance. The public often perceives these announcements as a way of increasing shareholder wealth at the cost of the employees. Support for this claim is often given in the form of isolated case study considerations. However, the case may be different for the renewable energy sector as changes in the overall institutional environment have sustainably deteriorated the prospects of this industry. Design/methodology/approach This study analyses stock market reactions of 65 layoff announcements made by companies in the renewable energy industry in the years from 2005 to 2014. The reactions are measured by cumulative abnormal returns, which are obtained by using the event study methodology. Findings It shows a significantly negative market reaction to the announcement of a layoff plan on the event day. The findings are generally in line with our expectations and underline the negative perspectives of the sector from a capital market point of view and the declining importance of the sector with respect to employment numbers. Originality/value The results of this study are important for investors when estimating the capital market reactions to layoff announcements and when they form their own expectations regarding possible future layoff announcements. For the public, the results are of interest as the prejudice, that layoff plans are used to increase shareholder wealth, can be dismantled. The opposite is shown.

scholarly journals Acquisitions of Financially Constrained Targets

2019 ◽  
pp. 1-10
Author(s):  
Maslinawati Mohamad ◽  
Surendranath Rakesh Jory ◽  
Nnamdi Madichie
Keyword(s):  
United States ◽  
Mergers And Acquisitions ◽  
Stock Returns ◽  
Abnormal Returns ◽  
The United States ◽  
Target Firm ◽  
Wealth Transfer ◽  
Stock Market Reaction ◽  
Cumulative Abnormal Returns ◽  
Acquisition Announcements

We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. Using a sample of the United States mergers and acquisitions of a period starts in 1985 and ends in 2012, we find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.

scholarly journals Market Reaction to Dividend Announcements During Pandemic: An Event Study

2021 ◽  
pp. 097226292110662
Author(s):  
Nisha Prakash ◽  
Yogesh L
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Market Reaction ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Weak Form ◽  
Primary Objective ◽  
Market Reactions ◽  
The Difference ◽  
Stock Market Reactions

This study analyses the difference in stock market reactions to dividend announcement during the pandemic. The thirty constituent stocks of Sensex, the index of Bombay Stock Exchange (BSE), is used for analysis. This allows cross-industry comparison of the market reaction. The study examines stock market reactions covering 44 days around the dividend announcement dates. The primary objective of this study is to understand whether the price adjustment linked to the dividend announcement news during the pandemic was different from the earlier years. This empirical study employs the conventional event study methodology using abnormal returns (ARs) to examine the stock market reaction to dividend announcement. The market reaction to dividend announcement was increasingly positive during the pandemic, compared to previous years. The statistical pooled t-tests showed there was a significant relationship between the pandemic and ARs. The findings also indicate that the difference in the market reaction to dividend announcement was more prominent in services stocks than that in manufacturing. Further, the results also verify the weak-form of efficiency of Indian stock exchange.

scholarly journals Abnormal Returns around Mergers and Acquisitions in the Nepali Stock Market

2021 ◽  
Vol 3 (1) ◽  
pp. 26-42
Author(s):  
Hari Prasad Pathak
Keyword(s):  
Stock Market ◽  
Mergers And Acquisitions ◽  
Financial Institutions ◽  
Economies Of Scale ◽  
Abnormal Returns ◽  
Market Model ◽  
Cross Sectional ◽  
Cumulative Abnormal Returns ◽  
The Impact ◽  
Merger Announcements

A merger includes two relatively equal entities that are combined to form one legal entity worth more than a sum of its two separate parts. In the last few years, many Nepali financial institutions have been consolidating through mergers and acquisitions. This paper aims to investigate how the stock market reacts when financial institutions announce mergers and acquisitions. This paper also examines the impact of cross-sectional variables on the abnormal returns obtained around merger announcements. The study covers 22 successful merger deals that occurred among 48 financial institutions over the period of 2004 to 2013. This paper used the event study method based on the market model to derive abnormal returns associated around the merger announcement date. The event dates are specified as the dates on which the mergers and acquisitions were announced. The results show that leaving a very few exceptional cases, none of the merged financial institutions received significant cumulative abnormal returns on the merger announcements, regardless of the use of different event periods. The cross-sectional regressions show that the pre-merger performance of target and relative market value are the significant influencing variables on acquirers' cumulative abnormal returns. The finding implies that Nepali financial institutions merge merely to increase their capital base without producing any synergistic effect. Therefore, they need strategic plans for choosing the right partner and achieving other benefits like synergy effect, economies of scale and cost reduction from mergers and acquisitions.

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