Stock
Market Reactions To Merger & Acquisition Announcements:
UK & US Evidence (2008)
There
have been many studies observing the effects of mergers and
acquisitions on the
stock price of target and bidding firms. This paper investigates
returns to UK
and US firms announcing mergers and acquisitions between 2002 and 2004. The returns to both bidder
and target firms
are examined. Further to this, variables explaining the returns are
investigated. The
study employs event study methodology, and uses the market model to
observe
abnormal returns to firms on the announcement day. As anticipated, the
findings
suggest that target shareholders in both the UK and US earn significant
positive returns. However, the returns to bidders in the UK and US
vary. UK
acquirers earn zero adjusted returns while US acquirers suffer
significantly
negative returns on announcement. With regard to the method of payment,
US
targets receiving pure cash offers experienced the highest returns,
followed by
mixed deals and pure stock deals; this evidence supports the
information
content hypothesis. Unexpectedly, in the UK, targets receiving bids
compromising of cash and stock (mixed) observed the highest returns. A
cross
section regression analysis was employed to identify the determinants
of
abnormal returns on announcement. The findings show that UK targets
benefit
from higher returns when offered larger premiums. Meanwhile, US targets
achieved higher returns when involved in pure cash and hostile bids.
Furthermore,
acquirers in the UK and US both experience positive wealth gains when
involved
in pure cash bids, the evidence also suggests that related acquisitions
are not
value creating.
- 107
pages – 30,000 words in length
- Excellent
literature review
- Excellent
use of economic models
- Good
in depth analysis
- Ideal
for business & economic students
1.0
Introduction
2.0
Literature Review and Hypothesis Setting
Forms
of Acquisitions
Classification
of Mergers and Acquisitions
Motives
for Mergers & Acquisitions
Failure
of M&A’s
3.0
Data Collection and Sample
Data
Collection
Sample
Characteristics
4.0
Methodology
Efficient
Market Hypothesis
Event
Study Methodology
Regression
Methodology
Limitations
5.0
Results
Targets
Acquirers
6.0
Conclusion
7.0
Appendices
8.0
References
1. Select reference number busman0038 from the dropdown list
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