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: | Deloitte Outstanding Thesis Award. |
| Link: | https://is.cuni.cz/webapps/zzp/detail/213628/ |
| 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. |
