Comprehensive data on a range of German companies is assembled and correlated as a means of quantifying the degree of abnormal returns within a given time interval, measured from the date of the merger announcement. Ramifications of these abnormal returns are discussed with respect to ongoing trends in the German market. Introduction Essential to any attempt to understand market movements are fluctuations is the analysis of financial signals. Finance being an issue of perception as much as mathematics, the public response to warning signs and indicators is an integral predictive tool for market analysis in any country. In this particular case, reaction to - and indicators prior to corporate mergers deserves special attention. The quantification of market response to merger announcements has the obvious potential of transforming the financial landscape; noteworthy questions to discuss in this analysis include whether information asymmetry - in the form of insider trading has a definitive role in the movements of high-level reactionary transactions. Other issues include whether finance regulations generate a sufficient influence to guide market forces in most cases. The unification of Europe has taken a direction that renders the discussion of German law, and that of other member states in regards to finance – especially relevant. In 2001 the European Parliament decided against a takeover directive with the potential to revolutionize local commerce and international transactions across the continent. The failure of the European takeover directive means that the finance laws of individual nation states, such as Germany will remain preeminent and sovereign within their borders. (Schmid and Wahrenburg, 2002) Under these conditions, this study will focus upon the reactions of companies within German markets as a model existing independent of any absolute control from a central European body. An analysis of the available data will ascertain the principle motivating factors behind stock price reactions to merger announcements for German companies. This investigation will seek to quantify abnormal market behaviors in the German economy as a result of merger announcements. The literature reveals differences in the regulatory environment for the German marketplace compare with other countries, such as the United States. The climate of corporate law in Germany allows license for German executives to occasionally give misleading comments pertaining to merger activities, whereas American executives are under more stringent restraints regarding publicized comments. These differences will be weighed against stock price performance data to derive a more thorough picture of the consequences of corporate mergers within the German economy. For the purposes of this study, mergers or corporate acquisitions will be considered as effectively identical and analyzed for their impact upon stock prices in the German market. When and where will abnormal uptrends in the marketplace occur? And what trends that differ from the normal projected returns commonly occurring can be attributed to corporate mergers? Are the laws of finance in the country under discussion more important in regards to changes in stock price than insider information? It is likely that a continuum exists whereby corporate laws intersect with the
Stock Price Reaction to Merger Announcements: an Empirical Note on German Markets Abstract An analysis of the behavior of the German stock market pertaining to mergers and corporate acquisitions is performed. Legal ramifications concerning variations in German law compared with other stock markets to which it is strongly tied are analyzed with respect to the consequences upon stock prices and abnormal returns in general…
Indications had shown that the relationship between the price change and trading volume had been greater when the share prices had ticked up in comparison to the share prices downticks. An even balance of the price-volume relation, was found when assessed over daily periods (22), without be affected by the average daily price shifting (33).
The efficient capital market hypothesis as applied to stock markets has affected the thinking of investment managers, corporate finance officers, and investors in the last three decades. This paper explains what the hypothesis is about based on a chapter in the textbook written by Elton, Gruber, Brown, and Goetzmann, and provides a critical assessment of its implications for the investor.
As a result of globalization market forces have started the policies with the role of respective governments becoming limited in determining the nature of imports and exports. It is now the MNCs who are effectively dictating the policies to the governments.
So the company should reveal its original financial position. If managers have superior information about the market value of the firm, they may know when the firm is overvalued. If they do, they might attempt to issue new shares of stock when the market value exceeds the correct value.
This means that in a split, investors may even gain.
Hence, when dividends are declared shareholder's equity decreases as a result of the decrease in retained earnings while liabilities increase as a result of the increase in dividends payable. Upon payment of the dividends, cash decreases while liabilities also decrease.
The period covered will be from September 20 to late November 2010.
The first thing that stands out on this graph is the remarkable stability, during the period covered, in both of these stock exchanges. The Israeli stock exchanges lowest point
In contrast to individual investors, the institutional investors are more and better informed. The institutions are more devoted and put in more resources to get information and sometimes the information known
144-146). Accounting literature alone cannot explain this, and thus, the need to investigate the short term and long-run effects of the both accounting and stock price effects in compensating the CEO.
The long-run effects of
The price of oil has decreased significantly. This has created economic risks in the GCC region due to massive effects on the stock in member states. The paper addresses the effects of decline in oil prices
3 pages (750 words)Essay
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