TITLE:
Changing Share Price after Announcement of the Merger and Acquisitions by Acquiring Firms Is Significant or Insignificant?
AUTHORS:
Md Arif Hasan Khan, Belal Uddin, Jahangir Hossain
KEYWORDS:
Merger & Acquisition, Event Study, Home Takeover, Cross Border Takeover, Abnormal Returns, Cumulative Abnormal Returns (CAAR)
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.12 No.4,
December
29,
2023
ABSTRACT: This paper scrutinizes a model of merger and acquisition declaration of
different companies in United Kingdom (Home Takeover) region and also other
countries (Cross-Border Takeover) during the time period of 01 January 2019 to
30 June 2022 and finally displays the consequence of 50 Home takeover companies
(UK companies acquired UK companies) and 50 cross-border companies (UK companies take over foreign companies)
to recognize the post effect of merger and acquisition declaration on
the stock prices of the target and acquired firms. Event Study Methodology has
been used for this study, like, Average Abnormal Returns (AAR) and Cumulative
Average Abnormal Returns (CAAR) are used to
analyze the different event windows about the stock prices of the target
and acquired firms. A paired sample investigation has also been directed by
associating the pre-and post-announcement returns on stock prices for the event window of
±5 days of the target and acquired firms. In the event windows, the stock price
of the target firm’s all is not positive CAAR but pointedly dissimilar from
zero. In the home takeover figures, all the AAR and CAAR are not significant
and some negative returns after the
post-declaration prove about the primary investor’s overreaction and
efficient market hypothesis (EMH). There is no presence of positive implication
in the cross-border pre-event return but only a positive implication returns in
the home takeover pre-event return that is also significant at the 10% level.