8342937140

SKAMSHER MOHAMAI) AND ANNA AK MD. NASSIR

ai tłu two-cłay announcement period. Other stud-ies in ihe USwhich used monthly returns reportcd mixed results.

For example, Mandelker (1974) reportcd in-significant positivc abnormal returns. Asquith (1982) reportcd significant positive returns and Franks, 1 larris and Mayer (1988) reportcd significant ncgativc abnormal returns. The inconsistent results reportcd in studics using monthly returns could be duc to ihe confounding ellcct of exo-genous events on ihe monthly returns which are difTicult to control by research design.

For the post-announcement period. Fishman (1986) argucs that bidders in cash ofTers cxperi-ence positive and significant abnormal returns. rhe abnormal returns for cash bidders in the post announcement period (day + 1 to day +■ 5) in this study ( l abie 1 (B)) are also positive but only the abnormal returns on day + 1 are significantly differ-ent Irom/ero, which isnoteonsistent with Fishman ^łs findings.

GONCLUSION

The findings of this study indicate tłiat bidders in sharc and combination ofTers earn significantly negaliveCARfor the two-day announcement period, whereas bidders in cash ofTers do not sufler losses. The diflerenec in the two-dav ( AR between bidders in cash and share oflers is positive and significant. These findings are consistent with the ‘Information hypothcsis* which suggests that financingatakeover ihrough exc hangę of common stocks comeys ncgativeinformation about the bidding firm \svalue.

I he findings of negative abnormal returns to bidders in share and combination ofTers are not consistent with theview that aajuisitionsarewealth-crealing investments.

IIowcycj, it is possiblc that the posiiive wealth cłTect of takeoYer announcemenLs is doininated by the cornbined eflccts of other negative Tac tors. One siu h factor is the łuibris bchaviour of bidder managers. Bidder managers may have been performing well, thus oYersiimating their capacity to manage the target company elficiently.

The negative returns to share and combination ofTers at the announcement are consistent with thenotion that bidders belicvc that the market has a short-term planning horizon. Bidding firms taking a log-term view may not consider the market signals as relevant to them.

ACKN OWLEDG EM ENT

I heauthorsacknowledge the helpful commentsof

98

ProfessorSimon Keane, Department of Accounting

and Finance, University of Glasgow.

REFERENCES

Acquisitions Monthly Magazine, January 1985 t₀ December 1988.    9

Asquith, P. and H. Kim. 1982. The Impact of Merger bids on the Participating Firms Security I iolders. /. Firuin. 37: 1209-1228.

Asqi;itH, P. 1983. Mergers, bids, Market Uncertainty and Stockholder Returns. /. Finan. Econs. 11: 51-83

Asom u, P., R. F. Bri ner and D.W. Mullins. 1987 The Pains to Bidding Firms from Merger./ Finan. Econs, 11:121-39.    I

AsQlTIH, P., R. Brunner and 1). Mullins. Merger Returns and Form of Finandng. Worki ng Paper, Havard University.

Barnes, P. 1978 The EfTect of a Merger on the Share Price of Bidding Firms. A cc mul Hus. Res 9: 1974. 162-165.

Barnes, P. The EfTect of a Merger on the Share Price I ofthc Attacker, Rcvisited. A cc. and Bus. Res. 15:45-49.

Bram ky, M., 1980. Inter-firm Tender OfTers and the Market for Gorporate Control./. Bus, 53: 345-375.

Bradi.KY, M., A. DKSAl and H F. Kjm. 1983. The Rationale behind Interfirm Tender Offers:

I n format ion orSynergy. /. Finan. Econs. 11: 183 206.

Brown, S.j.andJ.B. Warner. 1980. Measuring Set urit\ Price Performance./. Finan. Econs. 8: 205-258.

Brown, S. J. and J.B. Warner. Returns: The ('ase of F.ve Econs. 14: 3-31.

Gariton, W. T., 1).K. ( »uilkev and R.F. Harris. 1983. An Empirical Analysis of the Role of the Medium ofExchangc in Merges. /. Eman. 38: 813-26.

COCHRANE, D.. and (i. H. Orci Tl. 1949. Application of Lcast Squares Regression to Relationships Containing the Autocorrelated Error Terms. /. A mer. Stal. Assoc. 44: 32-61.

Dfnnis, D.K., and J.) McGonnell. 1986. Gorporate Mergers and Security Returns. /. Financ. Econs. 16

143-187.

Dimson, E. 1979. Risk Measurement when Shares are Subjected to Infrequent Trading./. Finan. Econs. 7:197-226.

Donn. P. 1980. Merger Proposals, Management I

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