Methods of Payment, Direct Takeovers and Privately-Held Targets: Evidence of Bidder's Return on Takeovers

Fauzias Mat Nor, Razali Ismail

Abstract


ABSTRACT
This study examines whether the proposed acquisition announcement on methods of payment has an impact on the bidder's returns behaviour. The analysIs uses the event study technique. the naive model. a model that is based on the market model with constrained a = 0 and f3 = 1 to compute the abnormal returns and to evaluate the effects of the proposed acquisition announcement on the bidder's returns. The study finds that Malaysian investors appear to he not in favour of cash-based acquisition to be done
directly by the bidding company as shown by the significant negative results on the bidder's average residuals after the announcement date. The same
goes for acquisition that targets private limited company. The insignificant results obtained on the announcement dale itself may give an Indication that such announcements do not really bring "surprisingly good news" to investors. However, the significant positive results of the bidder's average reSidual on acquisition by equity on and after the announcement. either to be done directly or on private limited takeover, may give an implication that the use of equity conveys favourable information about the bidding firms and are value relevant.
ABSTRAK
Kajian ini menguji sarna ada pengumuman tentang cadangan pengambilalihan mengikut cara membayar mempunyai kesan terhadap kelakuan pulangan syarikat pembida. Teknik kajian peristiwa berasaskan model pasaran dengan konstren a = 0 dan f3 = 1 telah digunakan untuk mengira pulangan luar biasa dan menilai kesan pengumuman cadangan pengambilalihan itu ke atas kelakuan pulangan pembida. Kajian mendapati. pelabur di Malaysia pada amnya tidak berkenan dengan pengambilalihan secara langsung berasaskan tunai sebagaimana yang ditunjukklln oleh keputusan negatif yang signifikan keatas purata sisa pembida selepas tarikh
pengumuman. Kesan yang sama ditunjukkan bagi pengambilalihan yang mensasarkan syarikat sendirian berhad. Pulangan luar biasa yang tidak signifikan pada hari pengumuman menunjukkan bahawa pengambilalihan
tidak sebenamya membawa berita baik yang menggemparkan kepada pelabur. Walaubagaimanapun, hasil keputusan pulangan luar biasa yang positij dan
signifikan keatas pengambilalihan secara ekuiti pada dan selepas hari pengumuman. sarna ada secara langsung atau pengambilalihan ke atas syarikat sendirian berhad memberi petanda bahawa pengambilalihan melalui ekuiti membawa berita baik dan memberi kesan nilai kepada pembida.


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