Shareholder wealth effects of M & As: the third wave from Malaysia

Nurhazrina Mat Rahim and Wee Ching Pok

International Journal of Managerial Finance, 2013, vol. 9, issue 1, 49-69

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.

Keywords: Acquisitions and mergers; Short-term wealth effects; Malaysia; Event study; Emerging markets (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:9:y:2013:i:1:p:49-69

DOI: 10.1108/17439131311298520

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