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Buyouts – a study of pre-announcement returns

Abstract
Problem: When firms face a possible acquisition and buyout from the stock market, the shareholders can earn huge returns since the acquirer offers a premium above market price. The implications of the efficient market hypothesis are that share prices are not predictable and investors cannot earn abnormal returns without any new public information. Aim and purpose: The purpose of this paper is to examine whether it occurs abnormal return on the target firm’s share before an announcement of a buyout is made. We aim to study shares listed on the Swedish stock market that have been bought out from the market and are not listed anymore. Method: The paper will be conducted with an event study. The event study methodology is often used to test the efficiency of a market by determine if there are abnormal returns for a selected security at a specific event Result and conclusions: Using hypothesis testing, we have concluded that it is statistically significant that cumulative abnormal return did occur during the 14 days preceding an announcement. The most likely explanation for this is thought to be rumors and inside information.
Degree
Student essay
URI
http://hdl.handle.net/2077/33340
Collections
  • Kandidatuppsatser Företagsekonomiska institutionen
View/Open
gupea_2077_33340_1.pdf (2.411Mb)
Date
2013-07-01
Author
Axelsson, Viktor
Nordell, Jacob
Keywords
Event study, buyout, abnormal returns, acquisitions, efficient market hypothesis
Series/Report no.
Industriell och finansiell ekonomi
12/13:28
Language
eng
Metadata
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