Merger And Acquisition ( M & A ) Deals

3058 Words13 Pages
Nowadays, mergers and acquisitions occur frequently in the global markets. It is a fast way to expand business or participate in another market, bringing to the changes in organisation and flow of the economic activities. Particularly capital is the most important factor in company strategy to consider taking merger and acquisition (M&A) deals. Given the different size of several takeover transactions, the decision of financing methods could considerably impact on acquirers’ ownership structure, financial leverage, and subsequent decisions on investments. Cash and equity methods can be interest-conflicted to business and shareholders. As most of bidders do not have enough capital, cash source basically relies on debt financing. As such,…show more content…
While there are many existing literatures that examine how payment methods in takeovers would affect stock returns and how M&A would affect acquires’ beta in the stock market, there has been no examination of the direct link between payments methods of M&A deals and the changes in acquiring firms’ beta since takeover announcement by different way of financing would have different debt-equity ratios which would impact on betas. Therefore, using M&As within the US market during 1990-2011, this paper aims to fill the gap and examine the performance of stock returns and firm-level betas based on different payment methods before and after M&A announcement and listed effect of targets with the use of updated data. Literature review and research questions Over the past two decades, the global market is quite dynamic experiencing 1997 Asian financial crisis, 2008 global financial crisis, and 2010s European debt crisis. Especially the financial crisis during 2007 to 2008, the U.S. stock market peaked in October 2007 and then entered a pronounced decline, which accelerated markedly in October 2008. By March 2009, the Dow Jones average had reached a trough of around 6,600 (Bloomberg, 2015). It is expected that because financial crisis made the stock environment fluctuated, stock returns might have
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