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Merger Impacts on Investor Expectations: An Event Study for Australia

Author

Listed:
  • Brian Diepold

  • Robert M. Feinberg

    (Department of Economics, American University)

  • David K.Round

    (Department of Economics, University of South Australia)

  • Jeremy Tustin

    (Department of Economics, University of South Australia)

Abstract

In previous work (Feinberg and Round, 2005), little evidence of share-price response to Australian price-fixing investigations was found. However, these investigations often involve a small part of a company’s operations and antitrust penalties have tended to be relatively small; in fact, some weak support was found for a greater response by investors when penalties were expected to be more significant. Mergers, on the other hand, clearly represent a much more significant event, and we would anticipate a clearer share-price response both to announced mergers and to associated antitrust challenges. While such studies have been done in other countries (primarily for the US), we know of no prior research of this sort for Australia. In this paper we focus on a sample of about 50 mergers and acquisitions involving Australian companies from 1996-2003, examining the impact on share prices of the announcement of these mergers both on the firms involved and on rival firms. For those which were challenged by the Australian antitrust enforcers, we also consider the impact of the announcement of such a challenge.

Suggested Citation

  • Brian Diepold & Robert M. Feinberg & David K.Round & Jeremy Tustin, 2007. "Merger Impacts on Investor Expectations: An Event Study for Australia," Working Papers 2007-07, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:0707
    DOI: 10.17606/3nn1-7717
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    2. Budzinski, Oliver, 2012. "Empirische Ex-Post Evaluation von wettbewerbspolitischen Entscheidungen: Methodische Anmerkungen," Ilmenau Economics Discussion Papers 69, Ilmenau University of Technology, Institute of Economics.
    3. Shams, Syed & Bose, Sudipta & Gunasekarage, Abeyratna & Velayutham, Eswaran, 2024. "Does continuous disclosure affect the market reaction to mergers and acquisitions announcements?," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    4. Syed Shams & Kristina Minnick & Mehdi Khedmati & Abeyratna Gunasekarage, 2024. "Gender diversity and acquisitions: How female directors add value in acquisition decisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 51(1-2), pages 113-147, January.
    5. 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.
    6. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    7. Farida Akhtar, 2017. "Conditional returns to shareholders of bidding firms: an Australian study," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57, pages 3-43, April.
    8. Balachandran, Balasingham & Fazzino, James & Shams, Syed, 2020. "A case study on Incitec Pivot's acquisition strategy of dyno nobel," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    9. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.

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