Contagion and Competitive Intra-industry Effects of Acquisition Announcements

• Main Authors: Ying-Jiuan Wong, 翁鶯娟
• Other Authors: Shao-Chi Chang
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/69831728947857626809

碩士 === 國立成功大學 === 企業管理學系(EMBA)專班 === 90 === ABSTRACT Previous studies about the announcement of acquisitions often focus on the rivals of target firms. Differently, this research aims to investigate the effect of acquisition announcements on the value of announcing firm’s competitors. This study examines how intra-industry stock price corresponded to the acquisition announcement of publicly listed companies of Taiwan from 1989 to 2001. We find that the valuation effects of the announcing firms and their industry rivals are both negative and significant. This result suggests that the contagion effect dominates the competitive effect when the acquisition announcements are declared. Consistent with contagion effect, negative cumulative abnormal return is significantly larger for the industries with high leverage and low competition. Whereas the competitive effect is dominant in industries where leverage and the degree of competition are low. Cross-sectional results also indicate that the stock price effects are more unfavorable for rivals with stock returns that are highly correlated with the announcing firm’s stock returns, for rivals with poor prior performance, and with the lower ratio of Herfindal Index to leverage.