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Two sides of the same coin?

Hansson, Anton LU and Östlund, Theodor LU (2015) FEKN90 20151
Department of Business Administration
Abstract
Purpose: This study’s purpose is to study the long term effects of M&A and to examine whether stock price is the only determinant of post-merger performance or if operating performance can be used as an additional determinant. How underlying variables impact these measures are also part of this study´s purpose.

Methodology: A quantitative approach is used where two event studies are conducted to determine the long term effects of Mergers and Acquisitions. To study the stock performance a buy and hold abnormal return model with benchmark firms are used. The accounting figures will be measured by relating their development to an industry benchmark. To ensure the statistical T-tests are used in order to ensure statistical significance.... (More)
Purpose: This study’s purpose is to study the long term effects of M&A and to examine whether stock price is the only determinant of post-merger performance or if operating performance can be used as an additional determinant. How underlying variables impact these measures are also part of this study´s purpose.

Methodology: A quantitative approach is used where two event studies are conducted to determine the long term effects of Mergers and Acquisitions. To study the stock performance a buy and hold abnormal return model with benchmark firms are used. The accounting figures will be measured by relating their development to an industry benchmark. To ensure the statistical T-tests are used in order to ensure statistical significance. Furthermore, multiple linear regressions will be used to examine how performance is affected by our set of variables.

Theoretical framework: The theoretical framework includes a description of mergers and acquisitions and why they occur. Furthermore, the relevant theories for this study, efficient market hypothesis and information asymmetry are also presented. A review of previous research conducted on M&A:s is also conducted.

Empirical foundation: The data sample consists of 64 transactions in Sweden, Norway, Denmark and Finland between 2004-01-01 to 2012-01-01. An additional criterion includes that both the acquirer and the target needs to be public.

Conclusion: This study finds no significant results in either long term stock or long term operating performance. Furthermore the results from the correlation between the measures indicate that there are a significant linear relationship between the measures after 24 months. Variables that had a significant on at least one of the measures included relative transaction size, market-to-book ratio and industry relatedness of the target and acquirer. (Less)
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author
Hansson, Anton LU and Östlund, Theodor LU
supervisor
organization
alternative title
Evaluating M&A performance from two different perspectives
course
FEKN90 20151
year
type
H1 - Master's Degree (One Year)
subject
keywords
Mergers, Acquisitions, Event Study, BHAR, ROA, Operating Performance, Regression analysis
language
English
id
7792796
date added to LUP
2015-09-15 16:27:44
date last changed
2015-09-15 16:27:44
@misc{7792796,
  abstract     = {Purpose: This study’s purpose is to study the long term effects of M&A and to examine whether stock price is the only determinant of post-merger performance or if operating performance can be used as an additional determinant. How underlying variables impact these measures are also part of this study´s purpose. 

Methodology: A quantitative approach is used where two event studies are conducted to determine the long term effects of Mergers and Acquisitions. To study the stock performance a buy and hold abnormal return model with benchmark firms are used. The accounting figures will be measured by relating their development to an industry benchmark. To ensure the statistical T-tests are used in order to ensure statistical significance. Furthermore, multiple linear regressions will be used to examine how performance is affected by our set of variables. 

Theoretical framework: The theoretical framework includes a description of mergers and acquisitions and why they occur. Furthermore, the relevant theories for this study, efficient market hypothesis and information asymmetry are also presented. A review of previous research conducted on M&A:s is also conducted. 

Empirical foundation: The data sample consists of 64 transactions in Sweden, Norway, Denmark and Finland between 2004-01-01 to 2012-01-01. An additional criterion includes that both the acquirer and the target needs to be public.

Conclusion: This study finds no significant results in either long term stock or long term operating performance. Furthermore the results from the correlation between the measures indicate that there are a significant linear relationship between the measures after 24 months. Variables that had a significant on at least one of the measures included relative transaction size, market-to-book ratio and industry relatedness of the target and acquirer.},
  author       = {Hansson, Anton and Östlund, Theodor},
  keyword      = {Mergers,Acquisitions,Event Study,BHAR,ROA,Operating Performance,Regression analysis},
  language     = {eng},
  note         = {Student Paper},
  title        = {Two sides of the same coin?},
  year         = {2015},
}