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International mergers and acquisitions: A jump diffusion model application

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  • Halil Kiymaz
  • Osman Kilic

Abstract

This paper empirically investigates international mergers and acquisitions (M&As) of foreign targets and bidders by analyzing the stock price behavior of the firms involved. The jump diffusion model is employed to study the effects of the M&A announcements on stock prices. The results indicate that acquisition announcements are perceived as a surprise by the market, but prices seem to adjust rather rapidly, supporting the semi-strong form of the market efficiency hypothesis. In addition, a comparison of the pure diffusion and jump diffusion models indicates that the jump diffusion model is statistically superior to the traditional event study methodology (pure diffusion model). (JEL G34) Copyright Springer 2004

Suggested Citation

  • Halil Kiymaz & Osman Kilic, 2004. "International mergers and acquisitions: A jump diffusion model application," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 239-251, June.
    • Handle: RePEc:spr:jecfin:v:28:y:2004:i:2:p:239-251
    DOI: 10.1007/BF02761614
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    References listed on IDEAS

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    1. Vedat Akgiray & G. Geoffrey Booth, 1987. "Compound Distribution Models Of Stock Returns: An Empirical Comparison," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 10(3), pages 269-280, September.
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    5. Doukas, John & Travlos, Nickolaos G, 1988. " The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions," Journal of Finance, American Finance Association, vol. 43(5), pages 1161-1175, December.
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    7. Biswas, Rita & Fraser, Donald R. & Mahajan, Arvind, 1997. "The international market for corporate control: Evidence from acquisitions of financial firms," Global Finance Journal, Elsevier, vol. 8(1), pages 33-54.
    8. Nimalendran, M, 1994. "Estimating the Effects of Information Surprises and Trading on Stock Returns Using a Mixed Jump-Diffusion Model," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 451-473.
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    Cited by:

    1. Jer-Shiou Chiou & Pei-Shan Wu & Ming-Chih Lee, 2006. "Variation of interest-rate parity and its asymmetry on stock return in a jump-diffusion process," Applied Financial Economics, Taylor & Francis Journals, vol. 16(17), pages 1309-1316.

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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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