JSE-listed firms and M&A’s: where is the economic value?

Abstract

This research empirically assesses the stock price reactions to mergers and acquisitions announcements by JSE-listed target and acquirer firms. The following is assessed over the defined windows: the target and acquirer firms, the method of funding (cash or stock) for both target and acquirer firms and lastly industry mergers with target and acquirer firms grouped together and separately. Data is collected for 87 merger deals, consisting of 87 target and acquirer firms. The period assessed is from 1990 to 2019. The event study methodology and hence the market model are employed as the primary methodology, with the net-market-returnmodel employed as a robustness check. T-tests, paired t-tests and a one-way ANOVA model are employed to test for relative significance. The results in this study are unique and contribute to how the South African market views M&A announcements. Hence this will influence the contemporary understanding of the South African economy towards M&A’s.