Returns to Acquirers of Listed and Unlisted Targets: An Examination of Australian Bidders

31 Pages Posted: 25 Aug 2014

See all articles by Pascal Nguyen

Pascal Nguyen

Neoma Business School; University of Technology Sydney (UTS); Financial Research Network (FIRN)

Nahid Rahman

University of Technology Sydney (UTS); Financial Research Network (FIRN)

Lucy Zhao

University of Technology Sydney (UTS); Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2014

Abstract

We analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets. The results show that acquirers of private targets benefit from a significantly higher share price reevaluation. This so-called listing effect is broad-based and persistent. It does not appear to depend on whether the target is large or small; whether it is related or not to the bidder’s industry; whether it is domestic or cross-border; and whether it is in the resources sector or not. We find only minor evidence that bidder returns might be stronger for larger acquisitions of private targets; for targets in the resources sector; and in subdued market conditions such as in the wake of the global financial crisis. In addition, our selection model suggests that endogenous choice of target is unlikely to have produced biased results. Overall, our findings are supportive of the view that market frictions contribute to make private firms attractive targets.

Keywords: acquisitions, private firms, listing effect, bidder returns, value creation

JEL Classification: G30, G31, G32, G34

Suggested Citation

Nguyen, Pascal and Rahman, Nahid I. and Zhao, Ruoyun, Returns to Acquirers of Listed and Unlisted Targets: An Examination of Australian Bidders (August 24, 2014). Available at SSRN: https://ssrn.com/abstract=2486096 or http://dx.doi.org/10.2139/ssrn.2486096

Pascal Nguyen (Contact Author)

Neoma Business School ( email )

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University of Technology Sydney (UTS) ( email )

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Financial Research Network (FIRN)

C/- University of Queensland Business School
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Australia

HOME PAGE: http://www.firn.org.au

Nahid I. Rahman

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Ruoyun Zhao

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia
612-9514-7745 (Phone)
612-9514-7711 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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