The effect of M&A announcements for European acquirors: Investigating the Abnormal Return in a Multinational Event Study in Combination with a Cross-Sectional Regression Analysis

Carl Axel Valdemar Steenberg & Lukas van Ledden

Student thesis: Master thesis

Abstract

This study has investigated how M&A announcements affect the abnormal return of acquiring firms in Europe. It has also explored how country specific, deal specific, company specific and accounting specific characteristics influences the abnormal return of acquiring firms at the time of a M&A announcement. This has been done by employing an event study methodology using three different approaches, one parametric test and two non-parametric rank tests. Furthermore, several regression analyses have been carried out to measure the effect of the country specific, deal specific, company specific and accounting specific characteristics and how they influence the abnormal return. The sample consists of 2895 M&A announcements taking place between 2010 and 2020, spread over 1307 firms listed on a European stock exchange. The event study indicates that acquiring firms experiences positive abnormal returns between 1.59% and 1.69% around the announcement date. The regression analysis has shown that each group of characteristics significantly influences the abnormal return of the acquiror at the time of a M&A announcement in the full model. Among the accounting variables, market capitalization was found to have a negative effect on the abnormal return and had the highest explanatory power with an adjusted R-squared of 2.98%. In the reduced model, looking at the group of country specific variables, all Hofstede variables displayed significance except the variable individualism. Surprisingly, none of the variables in the company specific group and only the variable “previous M&A experience” in the deal specific group were significant in the reduced regression model.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2021
Number of pages384