Determinants, Efficiency and Wealth Effects of Malaysian Corporate Mergers and Acquisitions
This research analyses four important issues pertaining to merger and acquisition (M&A) announcements in Malaysia to the bidder and target firms, namely the effects on shareholder's wealth, firm's financial performance pre and post M&A, effects of firm's characteristics on...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English English |
| Published: |
2007
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/6889/1/GSM_2007_5.pdf http://psasir.upm.edu.my/id/eprint/6889/ |
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| Summary: | This research analyses four important issues pertaining to merger and
acquisition (M&A) announcements in Malaysia to the bidder and target firms,
namely the effects on shareholder's wealth, firm's financial performance pre
and post M&A, effects of firm's characteristics on shareholder's wealth and
the determinants of shareholder's wealth. Taking into account the two
distinguished economic backdrops, this study segregates M&A
announcements into two sub-periods; the booming period of 1985 to 1994
and the period surrounding the financial crisis, from 1995 to 2001. Bidder
and target firms are classified into the finance and non-finance sectors and
the bidder firms are further categorised to bidders announcing to acquire listed target firms and bidder firms that announce to acquire non-listed
targets.
Employing the event study methodology, findings on the wealth effects
provide evidence that the target firms do not benefit from M&A activities,
regardless of classifications and sub-periods. M&A activities in the period
1985 - 1994 benefit bidder firms from the non-finance sector that acquire
listed target firms while M&A activities in the period 1995 - 2001 significantly
profit bidder's shareholders in the non-finance sector that acquire non-listed
target firms. The regression analyses results are consistent with results
reported in the literature that show profitability measures to be the main
factors in determining abnormal returns.
Generally, findings of this study show that during the booming economy of
1985 to 1994, M&A is not the growth strategy chosen by firms. The
enhanced values of bidders that acquire listed target firms indicate that M&A
is mainly done to capture larger market shares or to create monopolies. In
Malaysia, M&A is considered more as the strategy to survive as depicted by
the high merger announcements in the period of 1995 to 2001 when the
economy is in turmoil. Though the forced merger scheme is a necessary
measure taken at the time, findings of this study prove that enforced merger
scheme destroys value of both bidder and target firms listed in the finance
sector. |
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