The Implications of Takeovers: The Applicability of Michael C. Jensen and Richard S. Ruback’s theory of Hostile Corporate Takeovers on the U.K. Market

Alex Kulikowski

Student thesis: Master thesis


This master thesis examines the applicability of the theory of hostile corporate takeovers derived from the findings made in Michael C. Jensen and Richard S. Ruback’s paper The Market for Corporate Control: The Scientific Evidence. The thesis examines the applicability of the theory when applied on the U.K. stock market between 1985 and 2009. Jensen and Ruback’s theory is described and evaluated with other literature on corporate control, efficient markets, abnormal returns and wealth generation. By replicating Jensen and Ruback’s methodology, the thesis uses cumulative abnormal returns as the measurement of the effects hostile corporate takeover have on the share prices of acquiring and target companies in both successful and unsuccessful corporate takeovers. In order to find the CAR for successful and unsuccessful acquirers and targets, a number of event studies are used with different time intervals. After analyzing the results, the thesis confirms the applicability of Jensen and Ruback’s theory on the U.K. market in terms of successful targets; however, it does not confirm the applicability of successful acquirers and unsuccessful acquirers and targets. As such, the overall results of the thesis’s study indicate, with statistical significance, that Jensen and Ruback’s theory is not applicable on the U.K. market as a whole.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2013
Number of pages76