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Wealth Effects of Takeovers in Merger Activity Eras: Empirical Evidence from the UK

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  • Terence Tse
  • Khaled Soufani

Abstract

Existing studies on the assessment of shareholders' gains in takeovers have not taken the characteristics of the prevailing economic activity period into consideration. This study investigates the wealth effects to shareholders in the event of a merger and acquisition transaction by analysing 124 cases in the UK. The paper differs from previous studies in that it examines the abnormal returns found in two different economic periods. These include a boom period, characterised by high merger activity era (HMAE) and a trough period, characterised by low merger activity era (LMAE). The sample firms were categorised into friendly mergers and hostile takeovers— both successful and unsuccessful. The empirical findings derived from this work revealed that upon the differentiation of the two periods, the wealth effects to shareholders in the different transactions is related to the prevailing performance of the economy.

Suggested Citation

  • Terence Tse & Khaled Soufani, 2001. "Wealth Effects of Takeovers in Merger Activity Eras: Empirical Evidence from the UK," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 365-377.
    • Handle: RePEc:taf:ijecbs:v:8:y:2001:i:3:p:365-377
    DOI: 10.1080/13571510110079829
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    References listed on IDEAS

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    1. Hsiang-Hsi Liu & Tser-Yieth Chen & Lin-Yen Pai, 2007. "The Influence of Merger and Acquisition Activities on Corporate Performance in the Taiwanese Telecommunications Industry," The Service Industries Journal, Taylor & Francis Journals, vol. 27(8), pages 1041-1051, December.
    2. Mittal, Amit & Garg, Ajay Kumar, 2017. "Private information implications for acquirers and targets in horizontal mergers," MPRA Paper 85355, University Library of Munich, Germany.
    3. Andy Cosh & Alan Hughes, 2008. "Takeovers after "Takeovers"," Working Papers wp363, Centre for Business Research, University of Cambridge.
    4. Dhir, Sanjay & Ongsakul, Viput & Ahmed, Zafar U. & Rajan, Rishabh, 2020. "Integration of knowledge and enhancing competitiveness: A case of acquisition of Zain by Bharti Airtel," Journal of Business Research, Elsevier, vol. 119(C), pages 674-684.
    5. Rao, Ullas & Mishra, Tapas, 2020. "Posterior analysis of mergers and acquisitions in the international financial market: A re-appraisal," Research in International Business and Finance, Elsevier, vol. 51(C).

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