Chen Su
Country: United Kingdom
Affiliation: Newcastle University Business School
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Shareholders wealth and mergers and acquisitions (M&As)
Justice Kyei-Mensah , Chen Su , Nathan Lael Joseph doi: http://dx.doi.org/10.21511/imfi.14(3).2017.02Investment Management and Financial Innovations Volume 14, 2017 Issue #3 pp. 15-24
Views: 1604 Downloads: 301 TO CITE АНОТАЦІЯWe re-examine the abnormal returns (ARs) around merger announcements using a large sample of 8,945 announcements. We estimate the ARs using the Carhart (1997) four-factor model under the standard ordinary least square (OLS) method and the Glosten et al.’s (1993) asymmetric GARCH specification (hereafter, GJR-GARCH). Under the OLS method, acquirers do not generate significant cumulative ARs (CARs) in line with prior work. Our new results, however, show that under the GJR-GARCH estimation, acquirers generate positive and significant cumulative CARs. We attribute the gains to the use of the GJR-GARCH estimation method, as the GJR-GARCH method is more effective in capturing conditional volatility and asymmetry in the excess returns.