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• W295699213 abstract "INTRODUCTION There is a consensus among the various studies that target firms earn abnormal positive returns during the announcement period of a takeover bid. But whether the successful takeover increases or decreases the value of bidder common stock is not clear. Jensen and Ruback's (1983) study of the US takeovers and mergers prior to 1980, conclude that the target firm's shareholders benefit, and that the bidding firm's shareholders do not lose. Even Jarrell, Brickley and Netter (1988) who provide a comprehensive review of the empirical evidence regarding takeovers since 1980, note that the target firms benefit, while there is a statistically insignificant loss for the bidder's shareholders. In the United Kingdom's experience, Franks, Broyles and Hecht (1977), report gains to both target and bidder firms. However, Firth (1979, 1980) finds gains by the targets are more than offset by losses to the bidders. But later, Frank and Harris (1989) note that around the merger announcement date, target firms gain and bidders earn zero or modest gains. Murray's study (1991) of Irish takeovers and mergers reports significant gains to target firms, and an insignificant loss to bidders. However, he notes that the evidence on the performance of bidders and targets indicates that mergers and takeovers are, on average, value enhancing. In Malaysia, the studies on mergers and takeovers are still very scarce, due to the infancy of the Malaysian equity market. With the introduction of the New Economic Policy in 1970 , there has been an increase of corporate takeovers and mergers in the past twenty years [Gill (1986), Mat-Nor and Muda (1989)]. Various government-controlled corporate sectors have been set to acquire an interest in the corporate sector in trust for the Malays and natives, collectively known as Bumiputra. In the light of other relevant empirical literature on the subject from different established equity markets, this study will attempt to determine the effects of acquisition announcement on the price behaviour of the Malaysian bidder and target firms. METHODOLOGY DATA COLLECTION This study uses the daily common stock returns of the Kuala Lumpur Stock Exchange for 200 days before the acquisition announcement date and 200 days after. The study includes all acquisition news announced and carried out by bidders listed on the Kuala Lumpur Stock Exchange to acquire listed and non-listed target firms, and the bidders subsequently carried out the acquisition programme as announced. The period covered in this study is from January 1st, 1977 through December 31st, 1989. The data for the target firms however, include only the listed firms which were acquired by the listed bidding firms. The date of announcement which was chosen as the event date, was the announcement date as recorded on the first press release of takeover kept in the companies' file of the Kuala Lumpur Stock Exchange library. A total number of 45 target firms and 293 bidding firms were used in the analysis. The daily prices were obtained from The Securities Clearing Automated Network Sendirian Berhad (SCAN) database. The price relatives used were adjusted for capital adjustment (stock splits, stock dividend, and rights). No adjustment for cash dividends were made on ex-dividend dates. ANALYSIS OF DATA The basic methodology of this study involves the use of the following one factor market model or single index model; R sub i,t = alphai + betai R sub m,t + epsilon sub i,t ...,(1) where, R sub i,t = the daily return of either the bidding or the target firm i at time t, R sub m,t = the daily returns at time t of the market index, the Kuala Lumpur Stock Exchange composit index, alpha sub i = E(R sub i,t ) - biE(R sub m,t ), and where E is the expectation operator, beta sub i = covariance (R, sub i,t ,R sub m,t )/variance (R sub m,t ), epsilon sub i,t = stochastic error term. …" @default.
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• W295699213 date "1993-01-01" @default.
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• W295699213 title "The Effect of Acquisition Announcement on the Security Prices of Bidding and Target Firms: The Malaysian Experience" @default.
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