Long‐term share performance of Malaysian acquiring firms

Abstract

Purpose

The purpose of this paper is to examine the long‐term post‐acquisition share performance of Malaysian acquiring firms over the period 2000‐2004.

Design/methodology/approach

The authors use the event‐type methodology to analyse acquirer returns in relation to target status, method of payment and other firm characteristics, using both univariate and multivariate analyses. In total three performance measures are used to identify the long‐term share performance of acquiring firms: cumulative market‐adjusted abnormal returns, the buy‐and‐hold market‐adjusted and buy‐and‐hold matched‐sample abnormal returns.

Findings

The results show the existence of negative abnormal returns to acquirers over two‐ and three‐year periods after acquisition. The study also finds that acquirers of private targets earn negative returns, while acquirers of public targets earn insignificant returns. It is also found that under‐performance is limited to the small size acquirers and to large relative‐size acquisitions. Furthermore, the results indicate that acquirer's long‐term performance is not related to the method of payment and book‐to‐market ratio of the acquirer.

Originality/value

The Malaysian stock market is relatively small compared to the US and UK markets where most previous research has been carried out. The current study allows us to assess the robustness of the models and whether the findings in developed markets may be generalized to the smaller developing markets. This paper contributes to the present body of knowledge by offering evidence of acquirer's post‐acquisition performance from a developing market.

Citation

Siew Peng, L. and Isa, M. (2012), "Long‐term share performance of Malaysian acquiring firms", Managerial Finance, Vol. 38 No. 10, pp. 958-976. https://doi.org/10.1108/03074351211255164