The Abnormal Returns of Japanese Acquisition Bidders - Evidence in the 1990s

Abstract

This paper examines the market's reaction to news of corporate acquisitions by Japanese bidders during the 1990s. The findings indicate that Japanese bidders for Japanese targets incur positive abnormal returns surrounding the bid announcement dates, particularly after pro-M&A legislative changes in 1999. In contrast, Japanese bidders for global targets incur insignificant negative abnormal returns. Compared with other bidder-specific factors such as power, growth, and efficiency, leverage is dominant in determining bidders' abnormal returns. The findings help determine gains from trading strategies for M&A deals in Japan. The findings also provide insight into the current M&A environment in Japan as shaped by pro-M&A legislation.

Keywords: Merger and Acquisition, Japan, Event Study