Event Study On M&A Deals In Singapore
Mergers and acquisitions (M&A) are one of the most important events in corporate finance, both for the firms involved, as well as the economy. Empirical research on these events has revealed a great deal about their trends and characteristics over the last century.
Many researchers have addressed the question of gains from acquisitions. Typically, target shareholders earn significantly positive abnormal returns from all acquisitions while acquiring shareholders earn none or negative abnormal returns from mergers. The evidence is usually based on returns computed over a pre-acquisition period starting immediately before the announcement date and ending on or before the effective date. This assumes that prices fully adjust to the likely efficiency gains from acquisitions.
Our study attempts to examine the effects of M&A announcements on acquiring firms listed on the SGX through the event study methodology. At the same time, we will also to draw insights on the efficiency of the Singapore stock market with relation to M&A announcements. This paper starts with a review of past literature, followed by description of our methodology and data, motivations for M&A, empirical results of study, and ends with an interpretation of results.
2. REVIEW OF LITERATURE
Several studies indicate the presence of large abnormal returns accruing to shareholders of merged firms in the period immediately before the merger. However, evidence suggests that shareholders of acquiring firms earn, on average, no abnormal returns at the acquisition's announcement, though there is tremendous variation in these returns. Researchers have been unable to successfully explain much of this variation, partially because the announcement of a takeover reveals information about numerous things.
For example, Grinblatt and Titman (2002) state that the stock return at the time of the bid cannot be completely attributed to the expected...
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