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Conclusion on M&a

In: Business and Management

Submitted By priscillapoh
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Chapter 5 Conclusion and Recommendations
5.1 Summary of Findings
In this paper, we study the M&A performance in U.S banking industry in the period 2005-2010. Our results show that shareholders of the acquiring banks only experience positive excess return during announcement period, which is during 3-day event window { t-1, t+1} and 31-day event window {t-30,t+1}. For 3-day period, shareholders experience 0.43% of excess return. In long term, they experience negative excess return. Shareholders of target banks experience significant and considerably large positive excess return during pre-announcement and post-announcement. During a 3-day event window {t-1, t+1}, the average excess return is 23.17%. When we look at the correlation between total announced value and the excess return, total announced value has negative correlation with acquirers’ excess return only during event window {t-1, t+1}. Similarly, negative correlation is spotted between total announced value and target’s excess return during the same window. The difference in excess return between large and small deal gives us an overview of the relationship between transaction value and excess return. For both acquirers and targets, majority speaking, small deals give them more excess return pre-announcement, announcement, and post-announcement period. Only 1 year after the announcement that large deals allow them to experience more excess return. Regression analysis shows us that financial crisis positively impacts the excess return experienced by shareholders of acquiring banks. The variable Large Deal has negative relationship with the excess return for all event windows except 3-months before announcement. On the other hand, financial crisis has negative but insignificant relationship with excess return by target on 2 event windows, which are {t-30, t-1} and {t-30, t+1}. The variable…...

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