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    Consequences of Riding Takeover Waves: Australian Evidence

    Access Status
    Fulltext not available
    Authors
    Duong, Lien
    Izan, H.
    Date
    2012
    Type
    Journal Article
    
    Metadata
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    Citation
    Duong, L. and Izan, H. 2012. Consequences of Riding Takeover Waves: Australian Evidence. International Review of Finance. 12 (4): pp. 399-434.
    Source Title
    International Review of Finance
    DOI
    10.1111/j.1468-2443.2011.01144.x
    ISSN
    1468-2443
    School
    School of Accounting
    URI
    http://hdl.handle.net/20.500.11937/17628
    Collection
    • Curtin Research Publications
    Abstract

    This paper uses Australian data to analyze takeover bid premiums and long-term abnormal returns for mergers that occur during wave and non-wave periods. Findings reveal that bid premiums are slightly lower in wave periods, and bidding firms earn normal post-takeover returns (relative to a portfolio of firms matched on size and survival) if their bids were made in non-wave periods. However, bidders who announced their takeover bids during wave periods exhibit significant underperformance. For mergers that took place within waves, there is no difference in bid premiums nor is there a difference in the long-run returns of bidders involved during the first half and second half of the waves. We find that none of prominent theories of merger waves (managerial, misvaluation, and neoclassical) can fully account for Australian takeover waves and their effects. Instead, our results suggest that Banal-Estanol et al.'s screening theory of merger activity, by combining the misvaluation and neoclassical theories, may provide a better explanation.

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