Event study - the impact of merger announcement on the company´s stock prices

Abstract

In 2019, U.S. Mergers & Acquisitions Value accounted for 9.31% of the U.S. GDP. To understand whether firms benefit or not from practicing M&A transactions, it is investigated in this paper the effect of merger announcement on both the acquirer’s and the target’s stock. Different methodologies for expected return are presented and discussed, afterwards, based on the abnormal returns calculated, the assumption of market efficiency is tested along with a cross-sectional comparison between different industries and time period.