SWEDISH BIDDER´S PERFORMANCE FROM TAKEOVERS - A quantitative event study comparing domestic and cross-border targets

Abstract

We examine Swedish bidder’s shareholder return on a takeover announcement based on a short-period event study. Further, the bidder return is examined based on whether the target is domestic or cross-border. Previous research is contradictory regarding the overall performance, which caused our attention to investigate whether the record differs with another dataset and geographical scope. Moreover, previous studies that have distinguished cross-border- and domestic takeovers indicate that domestic takeovers outperform cross-border takeovers. Our results reveal that Swedish bidders gain a 2,3% significant positive three-day average cumulative abnormal return (CAR). Further, the domestic takeovers outperform the cross-border takeovers with 4%. However, we found no significant difference in the CAR between the domestic and cross-border bidders when controlling for deal characteristics. Our regression analysis shows that size effect and payment type are contributory factors to our result. We reveal that the Swedish market appears to have unique characteristics that potentially explain why our result is contradictory to previous groundwork. Finally, we are two of the first authors that examined the overall, cross-border, and domestic bidder stock performance with a fully Swedish dataset.