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The Revaluation Effect Following M&A Withdrawals: Evidence from Europe between 1997-2019

Gomez, Anton LU and Hedin, Jonathan LU (2020) BUSN79 20201
Department of Business Administration
Abstract
The main purpose of this study is to examine the revaluation effect on European target firms following a withdrawn bid. Thereto, investigate if different deal characteristics including method of payment, company status, cross-border versus domestic, and industry relatedness cause any variation in the revaluation effect on target firm wealth. This thesis employs a quantitative research approach by estimating the net cumulative abnormal return (CAR) effect through an event study methodology. The results from the event study are translated into dependent variables and thereafter incorporated in regressions along with four explanatory variables and six control variables. The following theories are applied: the information hypothesis, the... (More)
The main purpose of this study is to examine the revaluation effect on European target firms following a withdrawn bid. Thereto, investigate if different deal characteristics including method of payment, company status, cross-border versus domestic, and industry relatedness cause any variation in the revaluation effect on target firm wealth. This thesis employs a quantitative research approach by estimating the net cumulative abnormal return (CAR) effect through an event study methodology. The results from the event study are translated into dependent variables and thereafter incorporated in regressions along with four explanatory variables and six control variables. The following theories are applied: the information hypothesis, the synergy hypothesis, and the new information hypothesis (NIH). Previous research is also used as theoretical lenses. The study is based on 107 withdrawn deals on the European market between the years of 1997 and 2019. The main finding from this thesis conveys that there is a statistically significant positive short-term revaluation effect on target shareholder wealth following bid withdrawals in Europe. The difference in average net cumulative abnormal return (CAR) between the categories in each of the four deal characteristics is, however, not statistically significant. (Less)
Please use this url to cite or link to this publication:
author
Gomez, Anton LU and Hedin, Jonathan LU
supervisor
organization
course
BUSN79 20201
year
type
H1 - Master's Degree (One Year)
subject
keywords
Withdrawn bids, Cancelled bids, Event study, Target revaluation, Cumulative abnormal return
language
English
id
9012761
date added to LUP
2020-08-21 14:05:48
date last changed
2020-08-21 14:05:48
@misc{9012761,
  abstract     = {{The main purpose of this study is to examine the revaluation effect on European target firms following a withdrawn bid. Thereto, investigate if different deal characteristics including method of payment, company status, cross-border versus domestic, and industry relatedness cause any variation in the revaluation effect on target firm wealth. This thesis employs a quantitative research approach by estimating the net cumulative abnormal return (CAR) effect through an event study methodology. The results from the event study are translated into dependent variables and thereafter incorporated in regressions along with four explanatory variables and six control variables. The following theories are applied: the information hypothesis, the synergy hypothesis, and the new information hypothesis (NIH). Previous research is also used as theoretical lenses. The study is based on 107 withdrawn deals on the European market between the years of 1997 and 2019. The main finding from this thesis conveys that there is a statistically significant positive short-term revaluation effect on target shareholder wealth following bid withdrawals in Europe. The difference in average net cumulative abnormal return (CAR) between the categories in each of the four deal characteristics is, however, not statistically significant.}},
  author       = {{Gomez, Anton and Hedin, Jonathan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Revaluation Effect Following M&A Withdrawals: Evidence from Europe between 1997-2019}},
  year         = {{2020}},
}