Method of Payment and Target Status: Announcement Returns to Acquiring Firms in the Malaysian Market

Mansor Isa, Siew Peng Lee

Abstract


This paper examines the impact of acquisition announcements on the acquirer’s returns in the Malaysian market for the period from 2000 to 2005. Using the market model with infrequent trading adjustments, our results reveal that acquiring firms obtain positive abnormal returns on the announcement day. When acquisitions are analyzed based on target firm status, we find that public acquisitions provide higher abnormal returns to the acquiring firms than private acquisitions. In terms of method of payment, the evidence suggests that cash acquisitions generate positive abnormal returns for the acquiring firms regardless of the target firm status. Finally, the size of the acquired asset value relative to the acquiring firms is positively associated with the acquiring firm’s abnormal returns.


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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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