A Study of Misevaluation, Merger Premium and Announcement-Period Returns in the Taiwan Market
Date Issued
2007
Date
2007
Author(s)
Hsu, Chia-Chin
DOI
en-US
Abstract
I investigate how misevaluation of acquirers and targets relate to the bid premium and announcement period abnormal returns. For the sample of 55 completed merger and acquisition cases during the period from 2000 to 2006 in the Taiwanese market, I use price to earnings ratio and price to book value ratio as proxies of misevaluation, to examine whether there is any difference between highly-valued and lowly-valued firms. The main result is that undervalued targets tend to be offered more bid premiums and overvalued acquirers tend to give more bid premiums. I also calculate the market value change of the acquirer and the target. I find that the total market value change is not significantly different from zero while abnormal returns of the acquirer is negative and that of the target is positive, so shareholder wealth transfer may exists. The detailed analysis suggests that valuation ratios dominate operating performance and cash flow in explaining the bid premium. Another finding is that corporate governance indeed can explain the announcement period abnormal returns and market value change.
Subjects
購併
購併溢價
異常報酬
迴歸模型
M&A
bid premium
CAR
regression model
Type
thesis
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