Page 91 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 1, 2015, pp. 61-94

Conclusion

This study examined effects of M&A announcement date on financial performance

of both: target and acquirer. First, the sample comprising companies in oil and gas

industry that announced M&A between 2000 and 2014 was built. To check the presence

of abnormal returns, a benchmark for normal returns was selected. Market indexes

related to energy sector or national stock exchanges were selected as s proxy for

expected market returns. After security and index prices were collected, event study

approach together with market model suggested by MacKinlay (1997) was used to

calculate abnormal returns caused by deal announcement. Afterwards, the results were

tested for significance level against null hypothesis.

Results, of the study on M&A in energy sector show significant positive returns

for the target companies, while negative for acquiring ones. Target companies in oil

and gas industry exhibit statistically significant CAR of 19.1% during event window

of [-20;+19] days. Results are consistent with Eckbo, Thorburn (2000) and De Long

(2001) who showed evidence of positive abnormal security returns in their studies.

Acquirers show negative abnormal returns with CAR of -2.16% for the period of [-

3; +3]. Outcome regarding acquirers confirms efficient market hypothesis by obtaining

significant negative abnormal returns on event date. In addition, result of this study on

stock performance of acquirers is consistent with works of Mulherin, Boone (2000), De

Long (2001) and Kuipers, Miller, Patel (2003) who found negative abnormal returns for

bidders around M&A announcement date.

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