An Analysis of the Short Term Shareholder Benefits in Mergers and Acquisitions and the Wealth Effects of Various Bid Characteristics: Evidence from Australia

30 Pages Posted: 7 Dec 2010

See all articles by Abdel Karim Halabi

Abdel Karim Halabi

affiliation not provided to SSRN

Sisira R. N. Colombage

Monash Business School

Joshua Hellings

Monash University

Date Written: November 30, 2010

Abstract

This study explores the short term effects of Mergers and Acquisitions (M&A) in Australia by examining the cumulative abnormal returns earned over a five day event window by the combined, target and acquiring firms. The study examines the wealth effects on the firm of the four bid characteristics of diversification, hostility, method of payment and relative size. Results show that mergers are wealth-creating events for the combined, target and acquiring firms. The ideal merger for a target firm is where the target is small relative to the acquiring firm, and the ideal merger for the acquiring firm is with a target of 30% of its own size which is diversifying and not hostile. The findings which shed new some new insights into M&A have implications for investors, advisers and management.

Keywords: Mergers, Acquisitions, Wealth Effects

JEL Classification: G34

Suggested Citation

Halabi, Abdel Karim and Colombage, Sisira R. N. and Hellings, Joshua, An Analysis of the Short Term Shareholder Benefits in Mergers and Acquisitions and the Wealth Effects of Various Bid Characteristics: Evidence from Australia (November 30, 2010). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1717711 or http://dx.doi.org/10.2139/ssrn.1717711

Abdel Karim Halabi (Contact Author)

affiliation not provided to SSRN ( email )

Sisira R. N. Colombage

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Joshua Hellings

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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