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Finance & Accounting
Pages 15 (3765 words)
EVENT STUDY METHODOLOGY (Author’s name) (Institutional Affiliation) : Abstract Mergers and Acquisitions have become common phenomena in the recent few decades. The fact that financial markets have also grown have seen the need to assess the impact mergers and acquisition on the firm value…
Another impact of this study of effects of merger events is the impact it has on the competitiveness of the post merger firm in terms of profitability and efficiency. The competitiveness is a critical aspect to be considered by investors and managers before deciding on whether a merger is an appropriate financial decision to make. The way stock markets react to events around a merger and specifically the announcement of a merger can be used to reasonably predict the future financial and operational performance of firm in a financial market so long as it is efficient. This research looked at the stock performance of some of the listed stocks before a merger announcement and after the announcement. The daily stock prices were noted and analyzed statistically to highlight the changes in return and correlated with the stated event and other similar competing firms’ stock prices. It was generally noted that the announcement of a merger generally resulted in certain changes in the prices of stock. Review of literature points out that there is a negative correlation between the stock returns and hence the value of the firm after an announcement of a merger. This could be explained using hypothesis put forward by behavioral finance scholars. ...
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