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IMPACT OF M&A ANNOUNCEMENT ON ACQUIRING AND TARGET FIRM’S STOCK PRICE: AN EVENT ANALYSIS APPROACH
Abstract
This research paper empirically analysis the differences in stock price reaction due to merger announcement both target and acquiring companies. Moreover, before merger announcement the role of insider information is also empirically tested and explained. However, the traditional event study methodology is used to conduct the research and investigation. To find out the period where the price run-up initiate, how the stock market reaction after the merger and finding the target and the merger companies cumulative average abnormal return (CAAR), therefore event window has been considered and compared. The findings indicate pre-announcement period price run-up for the both target and acquirer companies which indicate the leakage of information or an anticipation of some good news. On the other hand, post-announcement period price downgraded for the acquirer companies. Noticeably, the trend pattern is not consistent for the both target and acquirer companies over the 10 days period.
Keywords Stock, Acquisition, Merger, Event study, CAAR