Wealth Effects in Mergers and Acquisitions in the Nordic Countries: An Empirical Study of Short-Term Abnormal Returns

Kean Bang-Sørensen

Student thesis: Master thesis

Abstract

This thesis investigates the value creation and value drivers for acquiring listed companies in the Nordic countries between 2005 and 2020. The study conducts an event study on a sample of 818 companies and supplements with a cross-sectional multiple regression analysis to test the robustness of the event study results. Existing literature is extensive, but the Nordic countries are less represented. The literature agree that target shareholders experience high abnormal returns from M&As but acquirer returns are more inconsistent. Companies engage in M&A to increase firm value as explained by the neoclassic theory. The lack of evidence of value creation for acquirers in the literature are explained by issues with asymmetric information and theories such as agency, signal, and hubris and herding. The main findings of this thesis can be summarized to: 1) Acquirers experience abnormal returns of +2.74% 2) Acquirers using earnouts experience abnormal returns of +2.66%. There is no difference in performance compared to non-earnout acquisitions. 3) Acquisitions of privately held targets outperform acquisitions of listed targets by +1.64%. 4) There are no clear differences between different methods of payment except weak evidence that mixedfinanced acquisitions outperform cash-financed acquisitions. 5) For private targets, there is weak evidence that mixed-financed acquisitions outperform cash-financed acquisitions. For listed targets, there is no differences between different methods of payment. Acquisitions of privately held targets outperform acquisitions of listed targets when financed with cash or mixed. 6) There is no difference in performance between related and diversifying acquisitions.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2021
Number of pages100
SupervisorsCaspar Rose