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Shareholders wealth and mergers and acquisitions (M&As)

Journal: Investment Management and Financial Innovations (Vol.14, No. 3)

Publication Date:

Authors : ; ; ;

Page : 15-24

Keywords : abnormal returns (ARs); GJR-GARCH; mergers and acquisitions (M&As); shareholders wealth;

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We re-examine the abnormal returns (ARs) around merger announcements using a large sample of 8,945 announcements. We estimate the ARs using the Carhart (1997) four-factor model under the standard ordinary least square (OLS) method and the Glosten et al.'s (1993) asymmetric GARCH specification (hereafter, GJR-GARCH). Under the OLS method, acquirers do not generate significant cumulative ARs (CARs) in line with prior work. Our new results, however, show that under the GJR-GARCH estimation, acquirers generate positive and significant cumulative CARs. We attribute the gains to the use of the GJR-GARCH estimation method, as the GJR-GARCH method is more effective in capturing conditional volatility and asymmetry in the excess returns.

Last modified: 2018-03-13 23:08:15