The Apportionment of Takeover Wealth Gains Over Investor Groups

Abstract

This paper identifies and apportions the wealth gain realisation from a takeover event for four investor groups, which are the domestic domiciled investor categories superannuation funds, nominees, incorporated companies, and individuals. For this analysis, it employs a trading profit performance. In addition, for robustness, a marked-to-market return is also determined for a small, medium, and large order size proxy. In regards to the MTM analysis, it was distinguished between passive and aggressive trades. This study finds that the investors/proxies identified as informed traders realise a higher performance from the takeover occasion. The present study results thus qualify the extant takeover research conclusion that target firm shareholders are the ‘winners’ from a takeover occasion. This research concludes that it is the informed investor who ‘wins’ and furthermore, that they do so at the expense of the less informed trader. This paper consequently provides a more complete description and understanding of the wealth gains from takeovers, which was the research goal.

Keywords: Takeover, Investor Returns

JEL Classification: G34