The efficiency of the Johannesburg Stock Exchange with respect to takeover information
Kana, S.P. (Suresh Parbhoo)
Takeovers are an important economic activity appearing to affect both the current profitability and the growth prospects of the firms involved. The market’s perception of these synergies seems to be reflected in the share prices of both the acquired and acquiror companies. This dissertation examines the impact of takeovers on share prices on The Johannesburg Stock Exchange (JSE), within the context of the efficient market hypothesis, during the period 1 January 1979 to 30 June 1984, and attempts to identify the number of months before the closing date of the offer that the market begins to anticipate the takeover. It is a study of an efficient market in the semi-strong form. The methodology used to identify the period when the market begins to anticipate the takeover, was to measure the residuals between the actual share f ^ prices and the expected share prices had there been no takeover, adjusted for movements in the market index, around the closing date to register for the j takeover offer. Significant departures from the normal residuals were | attributed to the takeover news. The market model, which has been tested in j South Africa and other countries for this type of study and for other tests of j the semi-strong form of the efficient market hypothesis, was used to estimate j ... expected ihare prices. i I. The dissertation also presents a theoretical discussion of the efficient 1 market hypothesis in Its three different forms and reviews the empirical jV research conducted on this theory, both in relation to takeovers and other I subjects, in South Africa, the United Kingdom and the United States of America. As regards the period when the market begins to anticipate the takeover ) it was found that, on average, the market began to anticipate the takeover ! seven months before the closing date of the takeover offer for both acquired j» and acquiror companies. Whilst the JSE appears efficient in the timing of the ! takeover adjustment for both acquired and acquiror companies it appears that ! it may be inefficient In the assimilation of the accuracy of the takeover news as far as acquiror companies are concerned, It was also found that a larger ! , proportion of companies taken over had negative residuals before the takeover 1 was discounted, and that a large proportion of acquiror companies reported negative residuals after the discounting of the takeover by the market.
Thesis (M.Com.)--University of the Witwatersrand, Commerce Faculty, 1986