Abstract
This study examines long-run stock performance for acquirers from years 2000 to 2013. Since acquisitions create agency problem and companies in Malaysia exhibit concentrated ownership structures, t...
Highlights
An acquisition enables an acquirer firm to diversify business activity, expand operation strategies and gain technical knowledge
Acquisition limited to short-term stock price performance, but it is important to see whether the return or loss persist in the long-run
Barber and Lyon (1997) argue that cumulative average abnormal return (CAAR) is a biased predictor of long-run buy-and-hold abnormal returns
Summary
An acquisition enables an acquirer firm to diversify business activity, expand operation strategies and gain technical knowledge. By using CAR in calculating long-run CAR return, they argue that underperformance return is driven by the lower price-to-book value of firms or “glamour” acquirer in their samples They claim that their results are driven by the fact that investors and management overestimate the bidder’s past performance. Cosh et al (2006) find that 363 UK firms in between 1985 and 1996 experience a negative and significant return of −16.26% by matching control firms based on industry and profitability in the 36-month post-acquisition period They argue that their study is in line with several studies in the UK which is underperformance long-run return for acquiring firms. Empirical evidence show the effect of the market performance and governance factors on long run performance are mixed for selected countries
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