Event Study on the Reaction of Stock Returns to Acquisition News

18 Pages Posted: 18 Nov 2016

See all articles by Fotoh Elad

Fotoh Elad

Karlstad University Business School, Student

Nko Bongbee

TD Bank

Date Written: November 2, 2016


This study examines the reaction of stock returns to acquisition news. A data of 51 observations of acquiring companies with publicly traded shares on the London Stock Exchange (FTSE100) is used over a period, from July 2012 to May 2013 with an estimation period [-100, -10] and test period [-5, 5]. The market model is applied here in order to predict future stock returns and the use of the simple regression to get the parameters of the regression equation. With this a test statistics obtained on average, is significantly positive and greater than the critical value. Therefore, the event of acquisition does appear to be related significantly to the abnormal returns and the null hypothesis being rejected.

Keywords: Event Study, Stock Returns, Mergers, Acquisition, Abnormal Return

JEL Classification: B26, E44, F65, G15

Suggested Citation

Elad, Fotoh and Bongbee, Nko, Event Study on the Reaction of Stock Returns to Acquisition News (November 2, 2016). Available at SSRN: https://ssrn.com/abstract=2863243 or http://dx.doi.org/10.2139/ssrn.2863243

Fotoh Elad (Contact Author)

Karlstad University Business School, Student ( email )

+46703552551 (Phone)

Nko Bongbee

TD Bank ( email )

66 Welington St W
Toronto, ON M5K 1A2

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