Foreign Investors’ Trading Behaviors around Merger and Acquisition Announcements: Evidence from Korea
Posted: 29 May 2019 Last revised: 7 Sep 2021
Date Written: November 1, 2020
This study examines foreign investors’ trading behaviors around merger and acquisition (M&A) announcements in the Korean stock market (both KOSPI and KOSDAQ markets). We find evidence that foreign investors are more likely to buy target stocks with larger wealth effects on the KOSPI market. In contrast, our results reveal that both foreign and domestic investors are not able to identify target stocks with larger wealth effects on the KOSDAQ market. Further, we find that in response to M&A announcements, only foreign investors can find target stocks with greater subsequent returns on the KOSDAQ market, but not on the KOSPI market.
Keywords: Mergers and acquisitions, Trading behaviors, Foreign investors, Korean stock market
JEL Classification: G14, G15, G34
Suggested Citation: Suggested Citation