Stock price reaction to merger and acquisition announcements in Vietnam's stock market: A case study of HoChiMinh stock exchange and HaNoi stock exchange from 2007 to March, 2012
Abstract
The impact of M&A announcements on the stock market has been studied and demonstrated in international stock markets including London, Hong Kong, China, Taiwan, Singapore, South Korea and Japan. However, there is no evidence for a public documentation about the impact of M&A announcements on Vietnam‟s stock market. Therefore, this creates the need to investigate the stock price reaction to merger and acquisition announcements on Vietnam‟s stock market. The results of this study will provide quantitative measures to support individual investors, the government and researchers on the related topic. A total of 67 M&A announcements were collected and observed for 21 days in the event window (including the announcement day, 10 days before the announcement day and 10 days after announcement day ), and 101 days in the
estimated period in Vietnam‟s stock market from 1st Jan, 2007 to 30th Mar, 2012 . The
results of this study indicate that there is no existence of the statistically significant abnormal returns for target companies in the period surrounding M&A announcements. However, there are the reactions of the stock prices of bidder companies to M&A announcements on day 9 and on day 10 after the day M&A announcements are published and there is the reaction of the stock of bidding firms in the M&A announcements by the form of financing. The results of this study show positively significant effect of the modes of payment to the abnormal returns of bidding firms. Besides, the coefficient of payment in cash is bigger and nearly double than the coefficient of payment in stock. It indicates that bidder companies prefer paying in cash to paying in stock when they
acquire other target companies.
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