Competition in the acquisition market and returns to bidders in Australia

Article

Shams, Syed. 2021. "Competition in the acquisition market and returns to bidders in Australia." Research in International Business and Finance. 55, pp. 1-21. https://doi.org/10.1016/j.ribaf.2020.101339
Article Title

Competition in the acquisition market and returns to bidders in Australia

ERA Journal ID19591
Article CategoryArticle
Authors
AuthorShams, Syed
Journal TitleResearch in International Business and Finance
Journal Citation55, pp. 1-21
Article Number101339
Number of Pages21
Year2021
Place of PublicationUnited States
ISSN0275-5319
1878-3384
Digital Object Identifier (DOI)https://doi.org/10.1016/j.ribaf.2020.101339
Web Address (URL)https://www.sciencedirect.com/science/article/abs/pii/S0275531920309478
Abstract

This study investigates the impact of takeover market competition on the short-run market performance of Australian acquirers. While the market for corporate control predicts a positive association between takeover market competition and acquirers’ announcement period returns, the winner’s curse hypothesis predicts a negative relationship. Using six alternative proxies to capture acquisitions market competition, I find that takeover market competition has a significant negative influence on acquirers’ announcement period returns. However, this effect is more pronounced among private target acquirers, large acquirers and stock-financed acquisitions. The findings further reveal that large bidders acquiring private targets through stock-financed acquisitions are the most penalised group in the capital market in a competitive acquisitions market. Additionally, evidence is found which suggests that competition-induced bids are associated with significantly higher bid premiums and experience negative post-acquisition performance. The findings remain robust to the implementation of alterations to several methodological concerns, the issue of endogeneity and sample selection variations.

KeywordsAcquisitions; Takeover market competition; Private target acquirers, Public target acquirers; Cumulative abnormal return; Size effect
ANZSRC Field of Research 2020350202. Finance
Byline AffiliationsSchool of Commerce
Institution of OriginUniversity of Southern Queensland
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