Company Takeovers and Equity Returns: The Target Size Effect

Don Anderson, Andrea Haynes and Richard Heaney
Additional contact information
Don Anderson: Department of Commerce, University of Queensland, St Lucia QLD 4072.
Andrea Haynes: Department of Commerce, University of Queensland, St Lucia QLD 4072.
Richard Heaney: Department of Commerce, University of Queensland, St Lucia QLD 4072.

Australian Journal of Management, 1994, vol. 19, issue 1, 1-30

Abstract: This paper examines the relationship between the size of a target and the market's reaction to the announcement of a takeover offer. Using the constrained (0,1) market model to estimate abnormal returns, results from a sample of takeovers from 1984-88 indicate size effects for takeover targets at announcement date. While this outcome is consistent with both infor Mation asymmetry and liquidity explanations for the size effect, examination of the extent to which our whole-sample result is robust to a classification of the sample into sub-samples on the basis of outcome shows that the target size premium is explained by firms which are subject to a subsequent takeover. Sensitivity tests are conducted to establish the robustness of this result. We conclude that it is unlikely that a statistically significant target size effect is present in takeovers although the results are ambiguous.

Keywords: TARGET RETURNS; SIZE ANOMALY (search for similar items in EconPapers)
Date: 1994
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/031289629401900101 (text/html)

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:sae:ausman:v:19:y:1994:i:1:p:1-30

DOI: 10.1177/031289629401900101

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().