Short-term Abnormal Return in Hostile Takeovers

Purpose: The main purpose of this thesis is to analyse if there are any significant differences in target shareholder return between friendly and hostile takeover bids on the Scandinavian market. We also intend to investigate the differences between hostile and friendly bid characteristics, and determine to what extent these differences can be explained by; firm relatedness, method of payment, time horizon, deal completeness and the acquiring firms’ geographical location. Theoretical perspective: Theories used are partially previous research, partially well known theories within M&A and Corporate Finance literature. Method: We analyse return to target shareholders by calculating Cumulative Abnormal Return using two models; Market Adjusted Return Model and Market Model. We compute CAR for six short-term event windows for Scandinavia, Sweden and Norway. Two types of benchmark has been used, Affärsvärlden General Index (AFGX) and Oslo Stock Exchange General Index (OSLOASH). Empirical findings: Our study is quantitative and based on a sample of 267 public takeover attempts, of which 48 are hostile, during 2000-2010. This sample has been analysed by dummies in linear regressions for Scandinavia, Sweden and Norway separately. Conclusion: Hostile takeovers, compared to friendly takeovers, have created approximately 4,5-8,5 per cent higher abnormal returns for target shareholders, on the Scandinavian market during 2000-2010. The result is statistically significant. No significance has been found on the explanatory variables that have been used in order to explain this over performance