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Conditional returns to shareholders of bidding firms: an Australian study
Author(s) -
Akhtar Farida
Publication year - 2017
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12149
Subject(s) - shareholder , bidding , selection (genetic algorithm) , sample (material) , selection bias , event study , econometrics , business , adverse selection , ordinary least squares , economics , tender offer , overconfidence effect , event (particle physics) , financial economics , monetary economics , microeconomics , actuarial science , finance , statistics , computer science , corporate governance , mathematics , context (archaeology) , artificial intelligence , chemistry , biology , psychology , paleontology , social psychology , chromatography , quantum mechanics , physics
This study examines the importance of the self‐selection problem when evaluating returns to bidder firms around announcement events. Takeover announcements are not random because managers decide rationally whether to bid or not, which indicates announcements are timed; consequently, in the presence of the sample selection problem, standard ordinary least square estimates are biased. Using a conditional model, the results indicate that after controlling for the self‐selection bias effect, shareholders of bidder firms make normal returns. In sum, failing to account for sample selection bias may lead to erroneous conclusions about a bidder's true economic wealth effects around an announcement event.