Long run stock performance of Malaysian acquirers

• Main Authors: Kadir @ Shahar, Hanita, Taufil Mohd, Kamarun Nisham, Ishak, Nor Hamiza
• Format: Conference or Workshop Item
• Language: English
• Published: 2016
• Subjects: HB Economic Theory
• Online Access: http://repo.uum.edu.my/25342/1/ICoGBSE%202016%20350-343.pdf; http://repo.uum.edu.my/25342/

Mergers and acquisitions (M&A) is one of the largest forms of corporate investment (Masulis, Wang & Xei, 2007). Acquisitions, especially the large ones, have long term consequences on the well-being of shareholder and other stakeholders as they are risky in nature. Existing studies provide substantial evidence on poor performance following completion of merger deals (see for example Aggrawal and Jaffe, 2000 for an extensive literature review). Most of the evidence on mergers in the context of developed countries document that for long-run stock performance, the average abnormal returns for bidding firms are at best zero return (Martynova & Renneboog, 2008). This result shows that M&As do not add value to the bidding firms. In this study, we focus on Malaysia, a developing economy where many firms are controlled by families. The sample is composed of acquisitions during the period 2000-2013. We find that on average acquiring firms neither create nor destroy long term values after controlling for the performance of a control group. This result shows that investors reacted rationally in valuing the bidding firms after the announcements of the completions of the acquisitions. Thus, at least in the long run performance of acquisitions, the capital market in Malaysia is informationally efficient.