Do mergers and acquisitions announcements create value for acquirer shareholders in Africa

Abstract

This study provides evidence of positive abnormal returns earned by shareholders of acquirers upon merger and acquisition (M&A) announcements on African markets. We observed significant cumulative abnormal returns for wider windows up to 25 days before and after M&A announcements. Confidentiality about pending merger announcements is poorly held, resulting in significant information leakage occurring up to six trading days. Further, we establish that firm industry, mode of payment, and nature of acquisition significantly influence abnormal returns. Finally, the paper found strong positive effect of firm‐specific factors (firm size and return on equity) on investor's investment decisions following a merger announcement.

Internal capital market mergers in weak external market environment: An emerging market evidence

“…First, in line with recent M&A literature (Amewu & Alagidede, 2018;Bi & Wang, 2018;Ferreira et al, 2009;Liu, Padgett, & Varotto, 2017), we include basic deal characteristics. First, in line with recent M&A literature (Amewu & Alagidede, 2018;Bi & Wang, 2018;Ferreira et al, 2009;Liu, Padgett, & Varotto, 2017), we include basic deal characteristics.…”

“…However, some studies suggest that ICMs, especially within a business-group setting can add value by reducing asymmetric information while making investment decisions, lowering transaction cost through intragroup related party transactions, mitigating external capital market frictions, offering cheap financing to distressed group-affiliated firms, and sharing financial risk among members (Almeida & Wolfenzon, 2006;Gopalan et al, 2007;Khanna & Palepu, 2000). In essence, ICMs can mimic important characteristics of market mechanism in advanced economies and offer an effective economic response to emerging market limitations-poor investor protection, weak contract enforcement, low information disclosure, and underdeveloped external capital markets (Amewu & Alagidede, 2018;Khanna & Palepu, 2000). Hence, prior literature has proposed two contradictory theories of ICMs-the bright-side view (advantages) and dark-side view (disadvantages) of ICMs.…”

Causal effect of mergers and acquisitions on EU bank productivity

“…Their empirical results reveal a positive and significant effect of M&A on consolidating banks. Amewu and Alagidede (2018) examine the relation between the stockholder dividends and the announcement of mergers and acquisitions of African banks. Their empirical findings demonstrate a positive relationship between bank productivity and merger and acquisition (M&A) notification.…”

Executive compensation and firm risk after successful mergers and acquisitions in Africa

“…This study focuses on Africa for several reasons. First, contemporary finance research on African has focused on capital market operations, firm performance, corruption, company regulations, and financial development and innovations (Amewu & Alagidede, 2018;Ojong & Obeng-Odoom, 2017;Okeahalam, 2004). For most of these studies, the goal is to provide insight on financial market development and regulation and establish the link between various corporate governance features and firm performance or drivers of EC.…”

“…Data: Data available on request from the authors Third, the African capital market is considered to be underdeveloped and inefficient and exhibit poor governance characteristics in the face of high level of corruption, political instability, and weak monitoring and regulatory systems (Amewu & Alagidede, 2018). Distinctive from developed capitalist markets, the weak corporate governance practices coupled with ineffective monitoring and supervisory mechanisms, as in the case of Africa, could influence the risk-bearing behaviour of corporate executives towards execution of M&A, even if the deals are not in the interest of share-…”