SHORT-TERM STOCK PERFORMANCE OF ACQUIRING COMPANIES AFTER MERGERS & ACQUISITIONS ANNOUNCEMENTS: CASE FROM FINNISH STOCK MARKET
Ågren, Jarno (2017)
Ågren, Jarno
2017
Kuvaus
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Tiivistelmä
The main objective of this study is to examine short-term performance of acquiring companies around mergers and acquisitions (M&A) announcements. This study concentrates on Finnish market, whereas previous studies mostly on UK and US markets, and most of the previous studies deal with long-term effects. The most essential research questions are, how event period affects to the abnormal returns of companies, and whether there are differences between industries. The purpose is to examine cumulative abnormal returns (CAR) with the estimation period from -10 to +10 trading days.
This study uses sample of stock prices of Finnish companies, which have completed only one M&A event during the years 2010-2015. The data consists daily close stock prices of five OMX25 Helsinki companies, and has been divided into 4 industries. Data has been restricted to take consider only M&As which status is completed. In this study is used event study methodology that is implemented in two ways by the mean adjusted return model and market model. Cumulative abnormal returns were examined by five event windows.
In this study is detected that cumulative abnormal returns are individual, and the companies react in different ways. The effect is stronger by market model, but the spread between companies’ CARs is greater by mean adjusted-return model than by market model. Both models detect significant cumulative abnormal returns. The results indicate that volatility of CARs fluctuates when event period expands. Furthermore, findings indicate that there is no difference between abnormal returns in the case of pre- and post-announcement period.
This study uses sample of stock prices of Finnish companies, which have completed only one M&A event during the years 2010-2015. The data consists daily close stock prices of five OMX25 Helsinki companies, and has been divided into 4 industries. Data has been restricted to take consider only M&As which status is completed. In this study is used event study methodology that is implemented in two ways by the mean adjusted return model and market model. Cumulative abnormal returns were examined by five event windows.
In this study is detected that cumulative abnormal returns are individual, and the companies react in different ways. The effect is stronger by market model, but the spread between companies’ CARs is greater by mean adjusted-return model than by market model. Both models detect significant cumulative abnormal returns. The results indicate that volatility of CARs fluctuates when event period expands. Furthermore, findings indicate that there is no difference between abnormal returns in the case of pre- and post-announcement period.