The Effects of Merger and Acquisition Announcements on the Security Prices of Bidding Firms and Target Firms in Asia

With the rise of the Asian financial crisis in 1997 and the smash of IT bubbles in 2000, there has been an increase in the number of corporate takeovers and mergers. In light of these events, we investigate the effects of acquisition announcements on the pricing behavior of the Asian bidding and target firms using the data of mergers or acquisitions announcements from the Bloomberg Database and Reuters Business Database fpr Hong Kong, China, Taiwan, Singapore, South Korea and Japan over the period from 1 January 2000 to 31 December 2007. Our result indicates that information concerning a forthcoming corporate takeover is considered good news for the shareholders of bidding firms but not regarded as good news for the shareholders of the target firms. In addition, we confirm the hypothesis that the abnormal return for the shareholders of bidding firms during the post-announcement period depends on the type of acquisition