Lai Kuen WONG

Date of Award


Degree Type


Degree Name

Master of Philosophy (MPHIL)

First Advisor

Dr. POON Pui-han, Winnie

Second Advisor

Dr. LAI Wan-lung


In Asia, the studies on mergers and takeovers are still very scarce. With the rise of financial crisis in 1997, there has been an increase of corporate takeovers and mergers. In the light of other relevant empirical literature on the subject from different established equity markets, the study is made to determine the effects of acquisition announcements on the price behavior of the Asian bidding and target firms. The objective of the study is to provide a reference for investors about whether the firms concerned experienced abnormal return around M&A announcements in Asia (no matter whether M&A activities were completed or not) and how type of acquisitions, mode of payment and form of target firms affected abnormal return of the companies. It makes use of information about mergers or acquisitions announcement over the period from 1 January 1990 to 31 December 1998 in the Extel Database CD-ROM 1998 and Reuter Business Database 1998 in Hong Kong, China, Taiwan, Singapore, South Korea and Japan. There are 45 mergers and 513 acquisitions for the overall sample in which 123 public (target) firms and 435 private (target) firms are involved. Cash is the major payment method in the entire sample.

The results indicate that information concerning a forthcoming corporate takeover is considered good news for the shareholders of bidding firms but not regarded as good news for the shareholders of the target firms because only shareholders of bidding firms can enjoy significant cumulative average abnormal return around the announcement period but the cumulative average abnormal return shown at the table 4 for target firms is negative statistically insignificant. The findings are contrary to a lot of previous studies concerned (see Chang (1998), Jarrell and Poulsen (1989), Asquith and Kim (1982), Dodd and Ruback (1977). The study also finds that abnormal return of shareholders of bidding firms and target firms at the announcement period is not function of type of acquisition, form of target firms and mode of payment. The findings are different from those of Suk and Sung (1997) and Travlos and Papaioannou (1991), Jensen and Ruback (1983).



Recommended Citation

Wong, L. K. (2000). The effects of merger and acquisition announcements on the security prices of bidding firms and target firms in Asia (Master's thesis, Lingnan University, Hong Kong). Retrieved from