Corporate takeovers, method of payment, and bidding firms' shareholder returns: Australian evidence

Abstract

This paper investigates the returns to the shareholders of the bidding firms in corporate takeovers. Previous studies have given inconclusive results and we believe this is a consequence of failing to control information or wealth transfer effects arising from the method of payment used in the acquisition. An event study was performed using recent Australian takeovers partitioned by method of payment. We found small significant positive abnormal returns to the shareholders of cash bidders and significant negative abnormal returns to the shareholders of bidders who used full or partial script offers.