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M&A Announcements and Their Effect on Return to Shareholders: An Event Study

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  • Priyanka Shah
  • Parvinder Arora

Abstract

This study examines a sample of M&A announcements in the Asia-Pacific region during the time period of May 2013 – September 2013 to identify the post-facto effect of M&A announcements on the stock prices of the target and the bidding firms. The study has used the event study methodology where the Cumulative Average Abnormal Returns (CAAR) of the target and bidder firm’s stock prices in different event windows have been analyzed. A paired sample analysis has also been conducted by comparing the pre-announcement and post-announcement returns of the target and bidder firms’ stock prices in the event window of ±2 days. Across all the event windows, target firm’s stock price yields positive CAAR that is significantly different from zero. Unlike the target firms, bidder firms do not show statistically significant CAAR across all the event windows. The target firms depict that the post announcement returns are significantly greater than the pre-announcement returns, indicative of the immediate market reaction to the information disclosure.

Suggested Citation

  • Priyanka Shah & Parvinder Arora, 2014. "M&A Announcements and Their Effect on Return to Shareholders: An Event Study," Accounting and Finance Research, Sciedu Press, vol. 3(2), pages 170-170, May.
    • Handle: RePEc:jfr:afr111:v:3:y:2014:i:2:p:170
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    References listed on IDEAS

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    1. Neelam Rani & Surendra S. Yadav & P.K. Jain, 2013. "Market Response to the Announcement of Mergers and Acquisitions: An Empirical Study from India," Vision, , vol. 17(1), pages 1-16, March.
    2. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
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    Cited by:

    1. Tchai Tavor, 2023. "The effect of natural gas discoveries in Israel on the strength of its currency," Australian Economic Papers, Wiley Blackwell, vol. 62(2), pages 236-256, June.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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