The diversification discount and takeovers: some Australian evidence

Michael Nankervis and Harminder Singh

International Journal of Managerial Finance, 2012, vol. 8, issue 1, 36-57

Abstract: Purpose - The purpose of this paper is to examine the existence of a diversification discount in the Australian takeover market. A sample of 446 Australian publicly‐listed firms involved in the market for corporate control was observed between 2000 and 2007. The authors examined two pre‐announcement and four post‐announcement periods, predominantly around the immediate event date, but also examined activity out to one year following the announcement.Design/methodology/approach– An event study, in this case, is used to examine abnormal returns around the announcement of a merger or acquisition. The timeframe this study intends to focus on is the period from announcement date to a time one year down the track which, although some studies may deem it “long‐term”, is still a relatively short‐term measure of performance. While many variables in acquisitions have been looked at in depth over the years, such as outcome, nature, payment method and size of deal, one area which has had considerably less attention is the area of specialisation and diversification. That is, do focus increasing (or non‐diversification) deals have different return patterns relative to focus decreasing (or diversification) deals? Findings - The overall findings of this paper are fairly mixed, barring a few exceptions, and there does not appear to be a great deal of variation in return patterns based purely on whether the announced acquisition is non‐diversifying or diversifying in nature. Originality/value - The paper is of particular value in Australia. Most of the research of diversification to date has taken place in the USA. Australia is similar to the USA in that it has a well‐developed economy based on common law principles and an active equity market, however, the existence of institutional and regulatory differences suggests that US results may not hold in Australia.

Keywords: Australia; Acquisitions and mergers; Diversification; Takeovers; G32; G34 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:8:y:2012:i:1:p:36-57

DOI: 10.1108/17439131211201022

Access Statistics for this article

International Journal of Managerial Finance is currently edited by Dr Alfred Yawson

More articles in International Journal of Managerial Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().