Shareholders wealth and mergers and acquisitions (M&AS)

Justice Kyei-Mensah; Chen Su; Nathan Lael Joseph

doi:10.21511/imfi.14(3).2017.02

Shareholders wealth and mergers and acquisitions (M&AS)

Justice Kyei-Mensah, Chen Su, Nathan Lael Joseph

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

1 Downloads (Pure)

Abstract

We re-examine the abnormal returns (ARs) around merger announcements using a large sample of 8,945 announcements. We estimate the ARs using the Carhart (1997) fourfactor model under the standard ordinary least square (OLS) method and the Glosten et al.'s (1993) asymmetric GARCH specification (hereafter, GJR-GARCH). Under the OLS method, acquirers do not generate significant cumulative ARs (CARs) in line with prior work. Our new results, however, show that under the GJR-GARCH estimation, acquirers generate positive and significant cumulative CARs. We attribute the gains to the use of the GJR-GARCH estimation method, as the GJR-GARCH method is more effective in capturing conditional volatility and asymmetry in the excess returns.

Original language	English
Pages (from-to)	15-24
Number of pages	10
Journal	Investment Management and Financial Innovations
Volume	14
Issue number	3
DOIs	https://doi.org/10.21511/imfi.14(3).2017.02
Publication status	Published - 4 Nov 2017
Externally published	Yes

Bibliographical note

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Keywords

Abnormal returns (ARs)
GJR-GARCH
Mergers and acquisitions (M&As)
Shareholders wealth

Access to Document

10.21511/imfi.14(3).2017.02Licence: CC BY-NC

PublishedFinal published version, 786 KBLicence: CC BY-NC

Nathan Joseph
- Research Centre for Financial & Corporate Integrity - Professor of Accounting and Finance
Person: Teaching and Research

Cite this

@article{4d25fc7f71c14a4b997c8e443b2ed91a,

title = "Shareholders wealth and mergers and acquisitions (M&AS)",

abstract = "We re-examine the abnormal returns (ARs) around merger announcements using a large sample of 8,945 announcements. We estimate the ARs using the Carhart (1997) fourfactor model under the standard ordinary least square (OLS) method and the Glosten et al.'s (1993) asymmetric GARCH specification (hereafter, GJR-GARCH). Under the OLS method, acquirers do not generate significant cumulative ARs (CARs) in line with prior work. Our new results, however, show that under the GJR-GARCH estimation, acquirers generate positive and significant cumulative CARs. We attribute the gains to the use of the GJR-GARCH estimation method, as the GJR-GARCH method is more effective in capturing conditional volatility and asymmetry in the excess returns.",

keywords = "Abnormal returns (ARs), GJR-GARCH, Mergers and acquisitions (M&As), Shareholders wealth",

author = "Justice Kyei-Mensah and Chen Su and Joseph, {Nathan Lael}",

note = "This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License",

year = "2017",

month = nov,

day = "4",

doi = "10.21511/imfi.14(3).2017.02",

language = "English",

volume = "14",

pages = "15--24",

journal = "Investment Management and Financial Innovations",

issn = "1810-4967",

publisher = "Business Perspectives",

number = "3",

}

TY - JOUR

T1 - Shareholders wealth and mergers and acquisitions (M&AS)

AU - Kyei-Mensah, Justice

AU - Su, Chen

AU - Joseph, Nathan Lael

N1 - This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

PY - 2017/11/4

Y1 - 2017/11/4

N2 - We re-examine the abnormal returns (ARs) around merger announcements using a large sample of 8,945 announcements. We estimate the ARs using the Carhart (1997) fourfactor model under the standard ordinary least square (OLS) method and the Glosten et al.'s (1993) asymmetric GARCH specification (hereafter, GJR-GARCH). Under the OLS method, acquirers do not generate significant cumulative ARs (CARs) in line with prior work. Our new results, however, show that under the GJR-GARCH estimation, acquirers generate positive and significant cumulative CARs. We attribute the gains to the use of the GJR-GARCH estimation method, as the GJR-GARCH method is more effective in capturing conditional volatility and asymmetry in the excess returns.

AB - We re-examine the abnormal returns (ARs) around merger announcements using a large sample of 8,945 announcements. We estimate the ARs using the Carhart (1997) fourfactor model under the standard ordinary least square (OLS) method and the Glosten et al.'s (1993) asymmetric GARCH specification (hereafter, GJR-GARCH). Under the OLS method, acquirers do not generate significant cumulative ARs (CARs) in line with prior work. Our new results, however, show that under the GJR-GARCH estimation, acquirers generate positive and significant cumulative CARs. We attribute the gains to the use of the GJR-GARCH estimation method, as the GJR-GARCH method is more effective in capturing conditional volatility and asymmetry in the excess returns.

KW - Abnormal returns (ARs)

KW - GJR-GARCH

KW - Mergers and acquisitions (M&As)

KW - Shareholders wealth

U2 - 10.21511/imfi.14(3).2017.02

DO - 10.21511/imfi.14(3).2017.02

M3 - Article

VL - 14

SP - 15

EP - 24

JO - Investment Management and Financial Innovations

JF - Investment Management and Financial Innovations

SN - 1810-4967

IS - 3

ER -

Shareholders wealth and mergers and acquisitions (M&AS)

Abstract

Bibliographical note

Keywords

Access to Document

Fingerprint

Profiles

Nathan Joseph

Cite this