Does Corporate Control Transactions’ Type and Focus really Create Value? Evidence from an Emerging Market

The failure of corporate-control transactions as strategic-oriented transactions to create significant values for their stockholders has triggered the management to deal with these phenomena by setting the right and best strategies and at the same time, to ensure company's growth in the future. This study tests empirically the implication of corporate-control transaction announcement on companies’ abnormal returns. Particularly, this study investigates the effect of the announcement of corporate-control transactions’ type (merger and acquisition, sell-off, joint venture, alliance) and focus (transformative or expansionist). It used the event study of 94 corporate-control transactions, which contains of transactions’ type and focus of during 1991-2001 periods. By using multivariate regression analysis, the results show that the announcement of corporate-control transactions significant and positively influence the cumulative abnormal return. Meanwhile, the announcement of the corporate-control transactions’ type and focus does not significantly influence stockholders' benefit. Generally, the characteristic of the independent and control variables in this study due to their implications to cumulative abnormal return are in-line with previous studies. In addition, this study has proven that the characteristic of investors in Indonesia's stock markets are very different with the ones in many other places like Europe or United States. In other words, this reflects the unstable and inefficiency of Indonesia's stock market as an emerging market.