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Do Mergers and Acquisitions Add Shareholder Value - An Empirical Event Study of the American and European Airline Industries

Melton, Kyle LU and Sterner, Johan LU (2019) BUSN79 20191
Department of Business Administration
Abstract
This study investigates and compares the value added by merger and acquisition activity within the airline industries of the United States of America and Europe following the deregulation of each respective market. An abnormal return event study methodology was performed with three different event window lengths using a final sample of 64 public airline mergers. The focus of the study was on abnormal returns generated to shareholders of the acquiring firm. In the case of true mergers, where an acquiring firm could not be identified, a weighted average approach was adopted. To test the robustness of the results, the analysis was repeated using two alternate regional reference portfolios, which resulted in no significant changes in the... (More)
This study investigates and compares the value added by merger and acquisition activity within the airline industries of the United States of America and Europe following the deregulation of each respective market. An abnormal return event study methodology was performed with three different event window lengths using a final sample of 64 public airline mergers. The focus of the study was on abnormal returns generated to shareholders of the acquiring firm. In the case of true mergers, where an acquiring firm could not be identified, a weighted average approach was adopted. To test the robustness of the results, the analysis was repeated using two alternate regional reference portfolios, which resulted in no significant changes in the underlying economic relationships. The findings infer a statistically significant positive abnormal shareholder return following airline mergers and acquisitions of 2.4%. The results also showed an American outperformance of approximately 1.4%, albeit with a lack of statistical significance. (Less)
Please use this url to cite or link to this publication:
author
Melton, Kyle LU and Sterner, Johan LU
supervisor
organization
course
BUSN79 20191
year
type
H1 - Master's Degree (One Year)
subject
keywords
airline industry, airline M&A, deregulation, consolidation, event study, market model, CAR, BHAR, merger value creation
language
English
id
8990086
date added to LUP
2019-09-30 14:16:41
date last changed
2019-09-30 14:16:41
@misc{8990086,
  abstract     = {{This study investigates and compares the value added by merger and acquisition activity within the airline industries of the United States of America and Europe following the deregulation of each respective market. An abnormal return event study methodology was performed with three different event window lengths using a final sample of 64 public airline mergers. The focus of the study was on abnormal returns generated to shareholders of the acquiring firm. In the case of true mergers, where an acquiring firm could not be identified, a weighted average approach was adopted. To test the robustness of the results, the analysis was repeated using two alternate regional reference portfolios, which resulted in no significant changes in the underlying economic relationships. The findings infer a statistically significant positive abnormal shareholder return following airline mergers and acquisitions of 2.4%. The results also showed an American outperformance of approximately 1.4%, albeit with a lack of statistical significance.}},
  author       = {{Melton, Kyle and Sterner, Johan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Do Mergers and Acquisitions Add Shareholder Value - An Empirical Event Study of the American and European Airline Industries}},
  year         = {{2019}},
}