Bidder Shareholder Returns and Method of Payment in Mergers and Acquisitions: Evidence from Finland 1997-2003
Salonen, Juhana (2006)
Kuvaus
Kokotekstiversiota ei ole saatavissa.
Tiivistelmä
This study examines theories and empirical evidence related to corporate merger and acquisition, and provides evidence with Finnish data. The main purpose of this thesis is to study bidder shareholder value gains from acquisitions by Finnish listed firms during 1997–2003. The total sample was also divided into three different sub-samples to distinguish, whether differences in the abnormal returns between different time periods and business cycles can be observed. Moreover, the method of payment in M&A and cross-border acquisitions were studied in order to find out whether those have a significant effect on bidder returns.
The total sample of acquisitions that was studied consisted of 443 acquisitions, in which the acquiring firm was listed in Helsinki Stock Exchange main list during 1997–2003. The bidder shareholder value gains were studied by examining shareholder abnormal returns around the acquisition announcement. The abnormal returns were examined by using event study methodology. The significance of the abnormal returns was then tested with the two tailed t-test.
The results provide evidence that the bidder shareholders, on average, experience significant positive wealth gains on the announcement day and close around the announcement, however, while the CAARs remain positive the significance of the returns diminishes when the observation period is extended. The overall market situation was not seen to have had a significant positive effect on bidder CAARs. The signalling effect of the method of payment was evident. The returns from the pure cash financed transactions differed significantly from the stock financed acquisitions. Moreover, no statistically significant differences between the returns of domestic and cross-border acquisitions were found, indicating that the Finnish capital markets are highly integrated.
The total sample of acquisitions that was studied consisted of 443 acquisitions, in which the acquiring firm was listed in Helsinki Stock Exchange main list during 1997–2003. The bidder shareholder value gains were studied by examining shareholder abnormal returns around the acquisition announcement. The abnormal returns were examined by using event study methodology. The significance of the abnormal returns was then tested with the two tailed t-test.
The results provide evidence that the bidder shareholders, on average, experience significant positive wealth gains on the announcement day and close around the announcement, however, while the CAARs remain positive the significance of the returns diminishes when the observation period is extended. The overall market situation was not seen to have had a significant positive effect on bidder CAARs. The signalling effect of the method of payment was evident. The returns from the pure cash financed transactions differed significantly from the stock financed acquisitions. Moreover, no statistically significant differences between the returns of domestic and cross-border acquisitions were found, indicating that the Finnish capital markets are highly integrated.