Assessment of market efficiency in Argentina, Brazil and Chile: an event study of mergers and acquisitions

Abstract

This paper presents an investigation into the relationship between the announcement of mergers and acquisitions, the existence of positive abnormal returns for shares of these firms, and market efficiency in Argentina, Brazil and Chile. Statistically significant Standardized Abnormal Returns were present in the event announcement and the following days in Argentina and Chile and on the event day in Brazil, confirming value creation signaling. Furthermore, the significance of abnormal returns in the event window, namely in the 5 days following the event in Argentina and Chile and the absence of such in Brazil suggests a more efficient market exists in Brazil, in keeping with the semi-strong market efficiency hypothesis. The absence of semi-strong efficient market behavior could prove valuable to investors who could use a window of a few days after the event announcement to accumulate abnormal returns, provided the appropriate research into news of possible mergers or acquisitions has been made.

Proceedings of the International Conference of Applied Business and Management (ICABM2020)

“…Table 3 shows a positive AAR for 41 days of the event window, for 41 days event window there were 8 days of significant AAR positive before the announcement and 5 days of a significant positive AAR before the announcement. A positive value in a semi-strong market will try to adjust to the right price level (Simões et al, 2012). As discussed in Section 4.2 a few days before the announcement there is already a significant positive AAR and after the announcement there are at T+1, T+8, T+10, T+15, and T+16.…”

“…There is no AAR after the announcement because before the announcement there is already AAR where this causes when the announcement of the stock price has overpriced, so after the announcement there is no AAR. As previously explained, prices that are over-priced or under-priced will try to adjust to the right price level (Simões et al, 2012). The absence of AAR after the announcement gives the effect that there is no CAAR after the announcement.…”

“…To close the 41-day event window, symbol (4) shows that there is no AAR and CAAR value reduction, which means the announcement of a merger as a signal only lasts a short term. Information leakage causes the announcement of a merger to not have the effect of AAR, but despite the leakage of information the AAR and CAAR will continue to adjust several days after the announcement when the stock price has returned to its normal price (Simões et al, 2012).…”

The Impact of Merger and Acquisition on Karachi Stock Exchange–Testing Semi-Strong Efficient Market Hypothesis

“…A significant amount of literature gives facilitation to know about the effect of M&A on stock returns (Gopalaswamy, Acharya & Malik, 2008;Simões, Macedo-Soares, Klotzle & Pinto, 2012). It also gives assistance in order to know that how target and bidder firms are affected by it.…”

Evaluation of Merger and Acquisition Processes in the Brazilian Banking Sector by means of an Event Study

“…The abnormal returns of the shares of both the acquired and the acquiring companies are positive and statistically significant, where the ones of the acquired companies (average of 10.82% and median of 6.39%) are larger than those of the acquiring companies (average of 3.38% and median of 3.52%). Simões et al (2012) developed a study comparing the abnormal returns of stocks of companies from different sectors that were involved in mergers and acquisitions in Brazil, Argentina and Chile, by means of a robust event study. They concluded that an increase took place in Brazil, represented by abnormal returns during the days of the event, while in Argentina and Chile, the subsequent abnormal returns of the days of the announcement were not significant.…”