PARTIAL ACQUISITION OF CANADIAN COMPANIES BY DOMESTIC AND FOREIGN COMPANIES: A VALUATION ANALYSIS

This research examines domestic and foreign partial acquisitions in Canada and investigates the resulting returns to target shareholders. The sample of the research is Canadian companies partially acquired from 1997 to 2005. The results show significant positive abnormal returns around the announcement date, which implies rising takeover expectation in the market. They provide a signal for investors to buy stocks before the announcement. The results also reveal negative abnormal returns in the one-year post acquisition period for targets, which implies diminishing takeover expectation. It is not recommended that investors invest a large amount without existing evidence of plans for a complete takeover by the acquirer. The return difference between the targets of domestic and foreign partial acquisitions is not significant around the announcement and in the post acquisition period. This implies that the market reaction for foreign partial acquisitions is not statistically different from domestic partial acquisitions. ii