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The method of payment as a market signal in merger and acquisition transactions for South African firms
Dissertation (MBA)--University of Pretoria, 2012.
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University of Pretoria
2013
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| _version_ | 1867613653486796800 |
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| access_status_str | Open Access |
| author2 | Ward, Mike |
| author_browse | Ward, Mike |
| author_facet | Ward, Mike |
| collection | Thesis |
| dc_rights_str_mv | © 2012 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
| description | Dissertation (MBA)--University of Pretoria, 2012. |
| format | Thesis |
| id | oai:repository.up.ac.za:2263/30620 |
| institution | University of Pretoria (South Africa) |
| last_indexed | 2026-06-10T12:39:34.197Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UPSpace — University of Pretoria Institutional Repository |
| publishDate | 2013 |
| publishDateRange | 2013 |
| publishDateSort | 2013 |
| publisher | University of Pretoria |
| publisherStr | University of Pretoria |
| record_format | dspace |
| source_str | UPSpace — University of Pretoria Institutional Repository |
| spelling | oai:repository.up.ac.za:2263/30620 The method of payment as a market signal in merger and acquisition transactions for South African firms Ward, Mike ichelp@gibs.co.za Linder, Nicholas Richard UCTD Market-adjusted equalweighted Information asymmetry Control-portfolios Abnormal returns Dissertation (MBA)--University of Pretoria, 2012. Merger and acquisition (M&A) transactions have been the subject of numerous studies over the years. The effect of the method of payment in M&A transactions has been studied in first world countries where information transfer is regarded as being highly efficient. The aim of this research was to study the effect of the method of payment to both acquirer and target companies post the announcement of M&A transactions within the context of emerging economies. South African JSE listed firms were used as a proxy for emerging market companies.Event study methodologies are only as sound as the statistical methodologies used to conduct the tests as well as the accuracy with which expected returns can be calculated. This being so, the aim of the research was to apply rigorous testing using various event study methodologies and making use of the literature to ensure that the findings were robust and the testing thorough. The various testing methodologies did not always provide the same findings further emphasising that the results are only as conclusive and robust as the methodologies used.Using the well substantiated event study methodology it was found that target companies do not significantly outperform acquirer firms. Although target companies showed a 12.5% increase over the longest event window being a 120 day window, whilst acquirers only reported 6.40% the difference was not found to be significant. The additional returns to target companies are likely due to the bid premium to stave off competition.Results indicate that acquirer companies using shares as the method of payment do send a negative signal to the market that their shares used as the currency of exchange in the M&A transaction is inflated. As a result acquirer companies using shares underperformed acquirer companies using cash as the method of payment.Finally target companies bought where cash was used as the method of payment outperform targets bought using shares as the method of payment. This is likely due to the capital gains tax implications in the year the M&A transaction takes place where cash is the method of payment.Although South Africa is regarded as being a less efficient market than first world economies with regards to information transfer, based on the study (which focused on large capitalisation companies with high trading volumes) South Africa does show similar results to those of first-world economies for acquirer cash against acquirer share returns as well as for target cash against target share returns, when looking at the method of payment as a market signal in M&A transactions. This research did not however find significantly higher positive returns for target companies against acquirer companies returns. Gordon Institute of Business Science (GIBS) unrestricted 2013-09-09T07:17:12Z 2013-04-30 2013-09-09T07:17:12Z 2013-04-25 2012 2013-02-23 Dissertation Linder, NR 2012, The method of payment as a market signal in merger and acquisition transactions for South African firms, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://hdl.handle.net/2263/30620 > F13/4/193/zw http://hdl.handle.net/2263/30620 http://upetd.up.ac.za/thesis/available/etd-02232013-124445/ © 2012 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. application/pdf University of Pretoria |
| spellingShingle | UCTD Market-adjusted equalweighted Information asymmetry Control-portfolios Abnormal returns The method of payment as a market signal in merger and acquisition transactions for South African firms |
| title | The method of payment as a market signal in merger and acquisition transactions for South African firms |
| title_full | The method of payment as a market signal in merger and acquisition transactions for South African firms |
| title_fullStr | The method of payment as a market signal in merger and acquisition transactions for South African firms |
| title_full_unstemmed | The method of payment as a market signal in merger and acquisition transactions for South African firms |
| title_short | The method of payment as a market signal in merger and acquisition transactions for South African firms |
| title_sort | method of payment as a market signal in merger and acquisition transactions for south african firms |
| topic | UCTD Market-adjusted equalweighted Information asymmetry Control-portfolios Abnormal returns |
| url | http://hdl.handle.net/2263/30620 http://upetd.up.ac.za/thesis/available/etd-02232013-124445/ |