Abstract
Recent studies in Accounting, Industrial Organizations and Finance often incorporate efficient market hypothesis in event studies. Event studies can be used to examine how changes in company environment affect corporate finance. However, using short-term stock prices to examine mean reversion may face a problem. Specifically, there is no evidence that changes in market values are unbiased estimates of changes in fundamentals. This study adopts program trading to test the mean reversion of an acquisition event (SPIL and ASE Group) between 2015 and 2016 in Taiwan. The results show that investors can use RSI spread and stock price deviation to make abnormal returns. In other words, investors can make profits based on technical analyses. Therefore, the evidence suggests that between 2015 and 2016, the security market in Taiwan did not fully meet the condition of a semi-strong form efficient market.
Highlights
IntroductionActivist shareholders play an important role in company mergers and acquisitions (M&A)
In recent years, activist shareholders play an important role in company mergers and acquisitions (M&A)
5.1.1 SPIL’s price reaction to takeover announcement Figure 1 and 2 shows the Abnormal returns (ARs) and Cumulative abnormal returns (CARs) based on GARCH model
Summary
Activist shareholders play an important role in company mergers and acquisitions (M&A). Activist shareholders will try to gain a board seat to affect company strategies and seek for outside takeover targets. In Taiwan, the ASE Group is the global top number one company in IC packaging and testing. The Group announced on 21 August 2015 to publicly acquire 24.99% shareholdings of SPIL, the global top number three company in the same industry, at a premium price of $45 per share between 24 August 2015 and 30 September 2015. The acquisition would be purely for financial investment purposes. SPIL later attempted to seek investment by Tsinghua Unigroup but due to the political issues between Taiwan and China, the cooperation between SPIL and Tsinghua Unigroup failed
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