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Company Takeovers and the Australian Equity Market

Author

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  • Peter Dodd

    (University of New South Wales. This paper has benefitted from the comments and criticisms of F. Finn and R. Officer. R. Ball's advice and assistance as supervisor for my M.Comm. thesis is gratefully acknowledged. I am also indebted to G. Smith for his assistance with the computer programming. P. Brown offered valuable comments on an earlier draft and also allowed access to the “N=651†version of his Price Relative Data File. The financial support of the Australian Research Grants Committee and the Reserve Bank of Australia is gratefully acknowledged.)

Abstract

Stock market prices are investigated around the dates of takeover offers. The 242 companies in the sample of takeover offers are classified firstly as offerors and offerees, and secondly as to whether or not the takeover was achieved. The study employs the two parameter asset pricing model and allows for shifts in risk. Any gains arising from takeovers are won by the acquired firm at the expense of the acquiring firm. The stock market reaction to takeover offers is generally consistent with the Efficient Markets Hypothesis with one notable exception. Alternative interpretations of this anomaly are considered.

Suggested Citation

  • Peter Dodd, 1976. "Company Takeovers and the Australian Equity Market," Australian Journal of Management, Australian School of Business, vol. 1(2), pages 15-35, October.
    • Handle: RePEc:sae:ausman:v:1:y:1976:i:2:p:15-35
    DOI: 10.1177/031289627600100202
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    References listed on IDEAS

    as
    1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    2. Halpern, Paul J, 1973. "Empirical Estimates of the Amount and Distribution of Gains to Companies in Mergers," The Journal of Business, University of Chicago Press, vol. 46(4), pages 554-575, October.
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    Cited by:

    1. Peter M. Clarkson & Allen Craswell & Prue Mackenzie, 2008. "The Effect of Board Independence on Target Shareholder Wealth," Australian Accounting Review, CPA Australia, vol. 18(2), pages 135-148, June.
    2. Firth, Michael, 1997. "Takeovers in New Zealand: Motives, stockholder returns, and executive share ownership," Pacific-Basin Finance Journal, Elsevier, vol. 5(4), pages 419-440, September.
    3. Shams, Syed M.M. & Gunasekarage, Abeyratna & Colombage, Sisira R.N., 2013. "Does the organisational form of the target influence market reaction to acquisition announcements? Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 89-108.
    4. Chris Ratcliffe & Bill Dimovski & Monica Keneley & Tom Smith, 2017. "Long-Term post-merger announcement performance. A case study of Australian listed real estate," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 855-877, September.
    5. Lien Duong & Izan H. Y. Izan, 2012. "Consequences of Riding Takeover Waves: A ustralian Evidence," International Review of Finance, International Review of Finance Ltd., vol. 12(4), pages 399-434, December.

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