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I Acquiring Firms ’ Shareholder Wealth Effects of Selected Asian Domestic and Cross-Border Takeover Bids: China and India
BibTeX
@MISC{Cheng_iacquiring,
author = {Yunfei Cheng and J. Wickramanayake and J. P. A. Sagaram},
title = {I Acquiring Firms ’ Shareholder Wealth Effects of Selected Asian Domestic and Cross-Border Takeover Bids: China and India},
year = {}
}
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Abstract
This study investigates the shareholders ’ wealth effects of mergers and acquisitions of Chinese and Indian acquiring companies. It examines market reactions to 157 Indian and 109 Chinese mergers and acquisition (M&A) deals with a value of at least US$1million during the period from 1999 to 2003. It is found that acquirers react positively with statistically significant bid announcement effects for the Indian sample for short window periods. However in a 301-day event window centred on announcement day, cumulative average abnormal returns for both samples are negative but statistically insignificant for Indian acquirers and statistically significant for Chinese acquirers. Another finding is that domestic M&As trigger higher wealth effects than cross-border operations for Indian acquirers while Chinese acquirers generate higher returns through cross-border M&As. Low market to book value ratio (MTBV) acquirers seem to out-perform high MTBV glamour acquirers based on both Indian and Chinese samples. There is strong evidence that the means of payment and tender offers have a substantial impact on the share prices of both Chinese and Indian acquirers. By way of policy implications of our findings, Chinese and Indian shareholders can use differential financing methods and varied wealth outcomes arising from investments based on style-characteristics of firms. For policy makers in these countries such as government authorities dealing with company mergers, they have an important role to play in creating a good competitive market environment for M&As.
Keyphrases
firm shareholder wealth effect selected asian domestic cross-border takeover bid indian acquirer chinese acquirer important role tender offer government authority share price differential financing method short window period out-perform high mtbv glamour acquirer strong evidence cumulative average abnormal return low market book value ratio market reaction policy implication policy maker chinese merger varied wealth outcome wealth effect indian sample significant bid announcement effect substantial impact cross-border operation announcement day 301-day event window good competitive market environment indian shareholder company merger chinese sample
