Corporate takeovers and the overpayment hypothesis : Australian evidence

Steffensen, Kristian Alexander. (2005). Corporate takeovers and the overpayment hypothesis : Australian evidence Honours Thesis, School of Business, University of Queensland.

       
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Author Steffensen, Kristian Alexander.
Thesis Title Corporate takeovers and the overpayment hypothesis : Australian evidence
School, Centre or Institute School of Business
Institution University of Queensland
Publication date 2005
Thesis type Honours Thesis
Total pages 99
Language eng
Subjects 1502 Banking, Finance and Investment
Formatted abstract This study examines the abnormal returns accruing to Australian acquiring firms in the long-run following a takeover. Furthermore, it advances the Overpayment Hypothesis as an alternative or additional explanation for the behaviour of these long-run returns. Although the Overpayment Hypothesis has been explored in a (limited) number of short-run U.S studies, the influence of overpayment on long-run returns has not been examined. Hypotheses are developed in relation to the expected underperformance of Australian acquiring firms in the long-run, and the corresponding association with several proxies for potential overpayment. These hypotheses are tested using an event study methodology and a combination of multivariate and univariate analysis on a sample of 77 Australian corporate takeovers occurring from 1997 to 2001.

The results reveal that shareholders of acquiring firms experienced an average abnormal return of -15.82% over the three-year period following a takeover. It appears that the magnitude of this result is driven largely by the first two years of returns. Furthermore, the balance of evidence from the multivariate regressions and univariate analyses suggest that overpayment influences these negative abnormal returns for the acquirer in the long-run, albeit over one year. Additionally, the results indicate mixed evidence for the Method of Payment and Hubris Hypotheses.
Additional Notes Variant title: Overpayment hypothesis: Australian evidence.

 
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Created: Fri, 26 Nov 2010, 11:29:52 EST by Muhammad Noman Ali on behalf of The University of Queensland Library