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Merger Performance Analysis Based on Event Study Methodology

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DOI: 10.23977/acccm.2024.060516 | Downloads: 22 | Views: 214

Author(s)

Lei Zhu 1

Affiliation(s)

1 School of Business, Nanjing University of Science and Technology ZiJin College, Nanjing, 210023, China

Corresponding Author

Lei Zhu

ABSTRACT

Mergers and acquisitions (M&A) can have both positive and negative impacts on companies. While they can enhance corporate value, they can also pose challenges. Regarding the impact of corporate mergers and acquisitions on performance, a variety of methods can be used to evaluate. These evaluation methods include but are not limited to: event study method, financial indicator method, economic value added method, balanced scorecard, etc. These methods evaluate corporate performance from different perspectives and can more comprehensively reflect performance changes before and after corporate mergers and acquisitions. The market model mainly analyzes the performance of a company from the perspective of market investors. On the one hand, the value of the company can be judged through changes in stock prices, and on the other hand, the impact of specific events on the company's performance can be analyzed through excess returns. To calculate the company's excess returns, the event study method can be used. This article takes the first announcement date of Company C's merger with Company S as the base date of the event, and then selects the base date and the days before and after it as the window period. By regressing the data in the estimation period, we calculate the excess returns obtained during the period of the merger and acquisition of the companies under study. By analyzing the excess returns, we can see whether the event has had a positive impact on the company's performance. This paper utilizes event study methodology to calculate the abnormal return and cumulative abnormal return of Company C's acquisition of Company S, revealing a short-term positive impact on the market value of Company C. Based on this finding, the paper proposes relevant recommendations.

KEYWORDS

Event Study Methodology, Performance Evaluation, Abnormal Return

CITE THIS PAPER

Lei Zhu, Merger Performance Analysis Based on Event Study Methodology. Accounting and Corporate Management (2024) Vol. 6: 109-114. DOI: http://dx.doi.org/10.23977/acccm.2024.060516.

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