The Evidence on Market Abnormal Returns in Acquisitions on the Warsaw Stock Exchange

Abstract

The paper provides evidence on abnormal returns performance in acquisitions on the Warsaw Stock Exchange. From a variety of measures, the authors chose the event study methodology, used in developed markets to evaluate post-acquisition performance and based on the market data, and Cumulative Average Abnormal Return (CAAR). The research sample has included acquired (target) firms quoted on the Warsaw Stock Exchange and selected according to the tender offers announcement in 1998-2004 as one of the formal ways of acquisition offer. The research study has focused on short-term abnormal returns (60 days before and 60 days after bid announcement). The evidence leads to the conclusion that positive reaction of investors to bid announcement on Polish market is similar to the reaction of investors on developed markets, and results in positive abnormal return for shareholders of acquired (target) firms. However the results obtained for individual sectors do not allow to draw unambiguous conclusions and indicate that abnormal returns for shareholders of acquired (target) firms are sensitive to the adopted model of evaluation.