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Tender offers in South America: Are abnormal returns really high?

Author

Listed:
  • DARCY FUENZALIDA
  • SAMUEL MONGRUT
  • MAURICIO NASH
  • JUAN TAPIA

Abstract

Different studies in developed capitalmarkets have found positive abnormalreturns of at least 15% during theannouncement date of a tender offer.Although there are almost no studiesfor South American stock markets,some studies reported positive abnormalreturns, ranging from 25% to50%, related to the announcement ofthe fi rst tender offer. In this study oneargues that estimated positive abnormalreturns in emerging markets arehigh because studies have assumed acompletely segmented capital marketby applying the market model with alocal stock market index. By allowingfor partial integration among fiveSouth American emerging markets,one shows that there are in factpositive abnormal returns previously,during, and after the announcementdate of the fi rst tender offer. However,the positive abnormal returnassociated to the announcementdate is in the order of 8%. A slightlyhigher abnormal return is obtainedusing a market model that accountsfor partial integration and downsiderisk. These results prompt towardsa lower positive abnormal return inthe sample of South American fi rmsstudied.

Suggested Citation

  • Darcy Fuenzalida & Samuel Mongrut & Mauricio Nash & Juan Tapia, 2006. "Tender offers in South America: Are abnormal returns really high?," Estudios Gerenciales, Universidad Icesi, August.
  • Handle: RePEc:col:000129:004144
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    Citations

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    Cited by:

    1. Mateo Vasco & Lina M. Cortés & Sandra C. Gaitán & Iván A. Durán, 2012. "Aplicación del modelo gravitacional al impacto del gobierno corporativo en las fusiones y adquisiciones en Latinoamérica," Documentos de Trabajo CIEF 10709, Universidad EAFIT.
    2. Madhumita Chakraborty, 2010. "The Wealth Effects of Takeover Announcement for Firms in the Financial Services Sector in India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(2), pages 199-227, August.
    3. Lina M. Cortés & John J. García & David Agudelo, 2015. "Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines," Documentos de Trabajo CIEF 12453, Universidad EAFIT.
    4. Lina M. Cortés & Diego A. Agudelo & Samuel Mongrut, 2012. "Waves and determinants in the activity of Mergers and Acquisitions: The Case of Latin America," Documentos de Trabajo CIEF 10658, Universidad EAFIT.

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