The And Long Term Shareholder Wealth Effects Of The Acquiring And Target Firms

1339 Words Dec 15th, 2015 6 Pages
Introduction:
This study aims to evaluate both the short term and long term shareholder wealth effects of the acquiring and target firms. Furthermore, the study will assess the relationship between the actual stock market reactions to mergers and acquisitions (M&As) announcements by examining the merger between First Busey Corporation and Main Street Trust Inc. First Busey Corporation is a financial holding company headquartered in Urbana, Illinois and Busey Bank is its subsidiary. Main Street Trust is a diversified financial services company and the holding company for Main Street Bank & Trust. On 20 September 2006, First Busey Corporation and Main Street Trust Inc. announced that they would come together as a merger of equals. Their agreement states that each Main Street common stock will receive a fixed exchange ratio of 1.55 shares of First Busey common stock. Although it was clear that this event is an acquisition with First Busey as the buyer and Main Street as the target firm, the difference between a “merger” and an “acquisition” has become more and more blur in various aspects. For the purpose of this study, the term merger and acquisition will be used interchangeably.
The first hypothesis of this research will be that, in the short run, the target firm would obtain a large positive and significant abnormal return. Next, the second hypothesis will be that, in the short run, the acquiring firm would obtain a small positive and significant abnormal return. Lastly, the…
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