Do acquisition & merger activities increase shareholders' wealth : evidence from Hong Kong Stock Market

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Do acquisition & merger activities increase shareholders' wealth : evidence from Hong Kong Stock Market

 

Author: Lo, Kam-fai Catrick
Title: Do acquisition & merger activities increase shareholders' wealth : evidence from Hong Kong Stock Market
Degree: M.B.A.
Year: 1993
Subject: Consolidation and merger of corporations -- China -- Hong Kong
Stocks -- Prices -- China -- Hong Kong
Stock Exchange of Hong Kong
Hong Kong Polytechnic -- Dissertations
Department: Dept. of Management
Pages: 1 v. (various pagings) ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1150960
URI: http://theses.lib.polyu.edu.hk/handle/200/2926
Abstract: This paper investigates whether acquisition and merger activities could have significant impact on shareholders' wealth of involving firms. Pricing behaviour of 10 days around the date of announcement of acquisition deal have been analyzed to detect abnormal movement, if any, in stock price with respect to their expected stock prices which are estimated by the Market Model relationship. It is found that acquiree firms usually obtained considerable gain from the acquisition deal at an average abnormal return of 16% which are cumulated over the 10 days period around the date of announcement of successful acquisition, while the acquiror firms could only command return defined in the same manner of an average of 4.6%. The methodology generally assumes that the market in Hong Kong meets the assumptions of Market Model developed by Sharp in 1963. However, the results of regression analysis for firms included in this study show that there are quite a number of firms in particular for the acquiree firms, with their share price movements which demonstrate the absence of a significant correlation between share price return and the Market Index return. This is mainly due to the fact that these stocks are thinly traded in the market and one of the assumption of market efficiency that all market participants are price takers are no longer satisfied for those stocks with little circulation in the stock market. Under such circumstances, the market prices might be well undervalued and these stocks might easily end up as target for takeover.

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