An analysis of takeover rumour in internet discussion sites

Joyce, Daniel J. (2001). An analysis of takeover rumour in internet discussion sites Honours Thesis, School of Business, The University of Queensland.

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Author Joyce, Daniel J.
Thesis Title An analysis of takeover rumour in internet discussion sites
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2001
Thesis type Honours Thesis
Total pages 104
Language eng
Subjects 1503 Business and Management
Formatted abstract
Anecdotal evidence suggests that the market reacts to information posted on Internet discussion sites (IDS). Yet empirical support of this proposition does not exist. This thesis addresses the primary weakness of the scant extant literature, by analysing the market reaction to takeover rumours in IDS. These posts are likely to cause a market reaction if IDS are viewed as a credible medium for the dissemination of information.

Using inter-day event study methodology, this thesis reports significant abnormal returns and trading volume in rumoured targets on the day a takeover rumour is posted, in the week prior and on the day following. An intra-day analysis of the market reaction identifies a significant positive return of over 0.39% in the ten-minute interval in which a takeover rumour is posted. However the remaining intra-day tests fail to provide evidence of a market reaction. The net effect of these analyses is moderate, but certainly not conclusive support for the proposition that the market reacts to IDS takeover rumours.

The quality of information contained in takeover rumour is then investigated. Research indicates that the rumoured targets in 7.58% of takeover rumours will become the subject of takeover activity within the following twelve months. Takeover rumours are not reported to contain inside information however. Given the high quality of information in takeover rumours, the market reaction to rumour of varying perceived credibility is assessed. Results indicate an insignificantly different market reaction to credible rumours and less credible rumours.

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Created: Tue, 16 Nov 2010, 12:38:18 EST by Muhammad Noman Ali on behalf of The University of Queensland Library