Work detail

The Effect of M&A on Competitors‘ Performance in China and the US

Author: Mgr. Renáta Wojnarová
Year: 2020 - summer
Leaders: PhDr. Jiří Kukačka Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 106
Awards and prizes:
Link:
Abstract: We examine the effect of merger announcements on the stock performance of
acquirers’ industry rivals in the context of Chinese and US deals between 1994
and 2017. Our analysis reveals that investors of rivals are able to earn abnormal
returns during days around merger announcement, meaning that markets are
not fully efficient as implied by the Efficient market hypothesis. We conclude
that in a reaction to the announcement, US rivals achieve generally negative
abnormal returns with higher magnitude and volatility compared to Chinese
rivals. Additionally, we observe that Chinese investors’ perception of mergers
turned out to be more conservative after the Global financial crisis. During days
around the merger announcement, signs of rivals’ abnormal returns also differ
on whether the target is public or private in both countries. Rivals operating in
industries that are substantially supported by Chinese government such as real
estate, pharmaceuticals, and chemicals experience positive reaction on mergers
of their competitors. Furthermore, we find that industries with increasing importance in Chinese developing economy such as banking, telecommunications,
and cyclical consumer products show a positive reaction of rivals’ returns on
merger announcements while in the developed US economy, a negative reaction
is observed.

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