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Self-selection Bias and the Listing Status of Target Firms: Value Effects in the Spanish Market

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  • Jose E. Farinos

    () (University of Valencia, Department of Corporate Finance, Faculty of Economics, Valencia, Spain)

  • Begona Herrero

    () (University of Valencia, Department of Corporate Finance, Faculty of Economics, Valencia, Spain)

  • Miguel A. Latorre

    () (Catholic University of Valencia “San Vicente Mártir”, Department of Accounting, Finance and Management Control, Faculty of Economics and Business, Valencia, Spain)

Abstract

As corporate announcement decisions are non–random events, standard OLS estimations must be corrected for the self–selection bias. In the M&A field several studies suggest that previous evidence on univariate analysis of abnormal returns is not fully reliable. We examine whether using the standard Heckman two–step estimation procedure to correct for endogeneity significantly changes the previous evidence with respect to the decision to acquire a listed versus an unlisted firm. Our results show that this correction does not change the conclusions drawn from unconditional abnormal returns. Therefore, we emphasize that the existence of self–selection bias should not mean a general invalidation of the previous evidence.

Suggested Citation

  • Jose E. Farinos & Begona Herrero & Miguel A. Latorre, 2017. "Self-selection Bias and the Listing Status of Target Firms: Value Effects in the Spanish Market," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(5), pages 423-438, October.
  • Handle: RePEc:fau:fauart:v:67:y:2017:i:5:p:423-438
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    References listed on IDEAS

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    Keywords

    sample selection bias; private targets; public targets; value creation;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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