Competition in the acquisition market and returns to bidders in Australia

Syed Shams

Research in International Business and Finance, 2021, vol. 55, issue C

Abstract: This study investigates the impact of takeover market competition on the short-run market performance of Australian acquirers. While the market for corporate control predicts a positive association between takeover market competition and acquirers’ announcement period returns, the winner’s curse hypothesis predicts a negative relationship. Using six alternative proxies to capture acquisitions market competition, I find that takeover market competition has a significant negative influence on acquirers’ announcement period returns. However, this effect is more pronounced among private target acquirers, large acquirers and stock-financed acquisitions. The findings further reveal that large bidders acquiring private targets through stock-financed acquisitions are the most penalised group in the capital market in a competitive acquisitions market. Additionally, evidence is found which suggests that competition-induced bids are associated with significantly higher bid premiums and experience negative post-acquisition performance. The findings remain robust to the implementation of alterations to several methodological concerns, the issue of endogeneity and sample selection variations.

Keywords: Acquisitions; Takeover market competition; Private target acquirers, public target acquirers; Cumulative abnormal return; Size effect (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:55:y:2021:i:c:s0275531920309478

DOI: 10.1016/j.ribaf.2020.101339

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