Abstract
Purpose: The purpose of this paper is to analyse the short-term wealth effects of mergers and acquisitions (M&As) in Malaysia. In addition, this study also examines the factors that affect the short-term shareholders' wealth during M&A announcements in Malaysia. Design/methodology/approach: The short-term wealth effect is measured by the Cumulative Average Abnormal Returns (CAARs). For the purpose of this study, the wealth effects of a sample of 180 target and 196 bidding companies announced in Malaysia during the period from 2001 to 2009 are analyzed. Findings: Results of the study revealed that there are positive market reactions by both target and bidding shareholders towards M&A announcements. However, target shareholders earned significantly higher CAARs than bidding shareholders. There is sufficient evidence to suggest that economic condition surrounding merger announcements, type of acquisition (diversified/related), premium paid and status of bid (successful/failed) affect the short-term wealth effects of target and bidding shareholders during M&A announcements. However, the impact on the target and bidding shareholders are different. Relative size negatively affects bidding shareholders' wealth. Target with higher ROE also earned significantly higher returns. Originality/value: There is high number of announced M&A deals in Malaysia, little is known about the determinants of short-term wealth effects of M&As in emerging market Malaysia, in particular the third M&A wave.
Original language | English |
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Pages (from-to) | 49-69 |
Number of pages | 21 |
Journal | International Journal of Managerial Finance |
Volume | 9 |
Issue number | 1 |
DOIs | |
Publication status | Published - Feb 2013 |
Keywords
- Acquisitions and mergers
- Emerging markets
- Event study
- Malaysia
- Short-term wealth effects