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Determining returns to bidding firms’ shareholders using different benchmark methods: an Australian study
Author(s) -
Akhtar Farida
Publication year - 2019
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.12281
Subject(s) - unobservable , shareholder , bidding , econometrics , estimation , benchmark (surveying) , economics , microeconomics , business , financial economics , finance , corporate governance , management , geodesy , geography
This article revisits the determinants of cumulative abnormal returns ( CAR ) for bidder firm shareholders around takeover bid announcements and in particular, if bidder CAR estimates differ significantly between conditional and unconditional models. The results indicate that CAR estimation is significantly different between the two models. The conditional model is theoretically superior to the traditional unconditional model due to the former controlling for unobservable factors surrounding the bid announcement. This study shows that it is important to account for unobservable factors in growth (organic versus takeover) strategies to infer the true effect of the bidder's characteristics on CAR .