Short-term impact of M&A announcements on acquiring firm's stock returns : the Swedish evidence

Abstract

The last decades increased the activity of mergers and acquisitions have attracted many researchers. There has been a lot of literature of M&A, but from the Nordic countries there are only a little evidence. Because researchers have not been that interested in M&A topic in Nordic countries, this study tries to fill that gap and focus on how merger and acquisition deals affect acquirer’s side in Sweden. Sweden is the most significant M&A market in the Nordic countries and covering more deals than Finland, Denmark and Norway together.

This study analyzes 120 M&A deals made between 2009 and 2016. Event study method is used to test short-term wealth effects on acquirer ́s side of the deal. The results show that acquiring side shareholders earn on average 1,84% abnormal return on announcement date. During the first two days from the announcement, shareholders earn cumulative average abnormal returns 3,06%. Little evidence is found that different deal characteristics would affect abnormal returns gained in M&A. Most clear results show industry-related deals as wealth building characteristics.