Impact of Domestic Acquisition on Acquirer Shareholders’ Equity: An Empirical Study on the US Market

Giampiero Favato, Mohamed Nurullah and Juliet A. Cottingham

Journal of Applied Finance & Banking, 2015, vol. 5, issue 4, 3

Abstract: This study investigated the short-term impact of domestic acquisitions on the acquirer shareholders’ equity in the US market. Average abnormal returns and cumulative average abnormal return were calculated to evaluate the acquirer’s return for a sample of 90 US domestic acquisitions based on US NASDAQ market during the period 2012-2014. The method of payment for the acquisitions, the size of the deal, and the industry relatedness were considered to assess the impact on the domestic acquirer shareholders’ equity. Event study methodology was applied to analyze the shareholders’ equity of US domestic acquirers in the short-term. The announcement date of the acquisition was considered as the event day and the impact of the acquirer return was observed for four event windows: pre-announcement, in - announcement, post-announcement, and the entire short term around the announcement. The results of the study revealed that domestic acquisition significantly increased the acquirer shareholders’ equity during the pre and in- announcement periods in the US market, but it brought the acquirer shareholders a negative return post acquisition announcement. The method of payment, deal size and industry relatedness had no significant impact on the acquirer shareholders’ equity. The paper must have abstract not exceeding 200 words.

Date: 2015
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