Market volatility in response to merger and acquisition announcements: Evidence from selected industries in the Philippine market

• Main Author: Romero, Frederick P.
• Format: text
• Published: Animo Repository 2017
• Subjects: Rate of return; Investment analysis; Consolidation and merger of corporations; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/1251; https://animorepository.dlsu.edu.ph/context/faculty_research/article/2250/type/native/viewcontent
• Institution: De La Salle University

In order to cater to more consumers and markets, both locally and internationally, companies perform various corporate actions that can greatly help them in business expansion, cost-saving, market valuation, operation efficiency, and research and development. One of these corporate actions is Mergers and Acquisition (M&A). This study examines the impact of M&A event announcements on the short-term stock valuation of the acquiring firm. The study covers all announced M&A events in the Philippines from 2007 to 2015 across five (5) major industries namely: Materials, Property, Consumer Staples, Energy and Financials. Event study methodology was used to determine the significance of the event across −1/+1, −3/+3, −5/+5, −10/+10 and −15/+15 for the event windows. Inferential statistics is set at the.01,.05 and.10 level of significance using Generalized Rank Test, two-tailed. Across all the industries used, only the companies under the Financial sector experienced significant negative abnormal returns across the 31-day event window. The results imply that the investors of most of the industries did not view the M&A event as something that will significantly influence the company’s market valuation. In addition, the overall impact of the event may not be well-disseminated to the market, thus, the investors were not able to determine the M&A’s significance on the overall value of the firm. Investors may use the results of this study in order to properly manage their portfolio during an M&A event in order to maximize their profit or minimize their investment risks. © 2017 American Scientific Publishers. All rights reserved.