| dc.description.abstract | We examine the announcement returns for Norwegian acquirers of foreign and domestic
targets between 1988 and 2014. This is done using panel data in a random effects model with
stock return data from NHH’s Børsprosjektet, and transaction data from SDC’s mergers and
acquisitions database. We are the first, to our knowledge, to use panel data regression analysis
on bidder announcement returns.
Analysing periods around acquisition announcements reveal that only the day of
announcement yields significant abnormal returns, which is consistent with the efficient
market hypothesis in semi-strong form. Furthermore, we find no significant abnormal returns
for firms acquiring public targets, which supports the theory of an efficient market for
corporate control. However, we find significant abnormal returns for firms acquiring private
targets. The returns from acquiring private targets are greatest when stock is used as the
method of payment, while using stock to acquire public targets yields the most negative
returns. The acquirer’s acquisition experience, the absolute size of the acquirer, and the target
being in a related industry all have negative effects on announcement returns. Furthermore,
we model the effect of relative size on announcement returns as a cubic function. This reveals
a negative relationship until the target is one fourth of the acquirer’s size, and a positive
relationship beyond this point. Additionally, we are, to our knowledge, the first to account for
the possibility of altered marked beta coefficients as a result of acquisitions, through the use
of a step-beta approach. | |
