Page 90 - Azerbaijan State University of Economics

N.V. Abdullayeva: Value creation through mergers and acquisitions in energy sector

and relevant benchmark for securities listed in U.S since some companies like

Schlumberger, National Oilwell Varco Inc, Halliburton Co., Apache Corp. included in

index are participants of M&A transaction in our sample. The scope of activity of

firms include oil drilling equipment, pipelines and etc.

National Stock exchange indices were used in case if international energy indexes

were not covering the scope of activity or geographic location of a company.

Next step after obtaining estimates for parametres a and b and selecting only

statistically significant ones, is to employ market model to obtain expected daily

returns for each company in our sample through the selected event window (20 days

with t(o) being announcement day of the deal. The computation of daily abnormal

returns is the difference between actual stock returns of the companies and market

model expected returns. In order to verify impact of that specific transaction on the

shareholders, different time periods pre and post deal were taken into account. Bradley

(1980) in his research has found that security prices had significant fluctuation several

days before the announcement of the deal. This can be explained by the leaked of

information or insider trading. In our research, we have to test the significance of

CARs (i.e. testing null hypothesis Ho). The null hypothesis states that the day of event

which is announcement day of a deal in our case has no impact on security returns.

The analysis in this paper was conducted by examining the sample of companies

selected during give 2000-2014 years. The results are described below and compared to

previous research done in this area. First, we will describe the impact effect of M&A

deal announcement on target companies shareholders and then on the acquirers.

90