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Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang GRADUATION THESIS Major: International Business Administration A STUDY ON WITHDRAWN MERGER PROPOSALS INVOLVING PRIVATE TARGET www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 1
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang TABLE OF CONTENTS LIST OF ABBREVIATIONS..................................................................................... LIST OF FIGURES .................................................................................................... LIST OF TABLES ...................................................................................................... ACKNOWLEDGEMENTS........................................................................................ CHAPTER 1: INTRODUCTION............................................................................1 1.1. Background.......................................................................................................1 1.2. Research questions and research objectives .....................................................3 1.3. Scope of the study.............................................................................................4 1.4. Research methodology......................................................................................4 1.4.1. Method of collecting data...........................................................................4 1.4.2. Method of processing data .........................................................................5 1.5. Thesis structure .................................................................................................5 CHAPTER 2: LITERATURE REVIEW................................................................7 2.1. Merger and withdrawals of merger...................................................................7 2.2. Empirical evidences of related literature about withdrawals of merger...........8 2.3. Factors affecting withdrawn merger proposals’ abnormal return ....................9 2.3.1. Target firm status .......................................................................................9 2.3.2. Method of payment...................................................................................10 2.3.3. Bidder cash level ......................................................................................11 2.3.4. Bidder leverage level................................................................................11 2.3.5. Abnormal return from merger announcement .........................................11 2.3.6. Multiple bidders .......................................................................................12 2.3.7. Relatedness...............................................................................................12 2.3.8. Relative size of bidder versus target ........................................................13 2.3.9. Financial crisis.........................................................................................13 www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 1
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang 2.3.10. Bidder’s return on assets........................................................................13 CHAPTER 3: RESEARCH DESIGN ...................................................................14 3.1. Estimation of valuation effects .......................................................................14 3.2. Multivariate analysis.......................................................................................15 3.2.1. Hypotheses................................................................................................15 3.2.2. Models ......................................................................................................16 3.3. Data and samples ............................................................................................20 3.4. Sample description..........................................................................................21 3.5. Correlation matrix...........................................................................................23 CHAPTER 4: EMPIRICAL RESULTS AND FINDINGS .................................26 4.1. Overview of Australian economy...................................................................26 4.2. Results from estimation of valuation effects ..................................................29 4.2.1. Not control for method of payment ..........................................................29 4.2.2. Control for method of payment ................................................................32 4.3. Results of multivariate analysis ......................................................................34 4.4. Robustness checks ..........................................................................................45 4.4.1. Robustness check with event window (-1,+1) ..........................................45 4.4.2. Robustness check with event window (-2,+1) ..........................................54 CHAPTER 5: CONCLUSIONS, RECOMMENDATIONS, AND LIMITATIONS .......................................................................................................64 5.1. Conclusions.....................................................................................................64 5.2. Recommendations...........................................................................................65 5.3. Limitations and suggestions for further study ................................................67 REFERENCES ........................................................................................................69 APPENDIX ..............................................................................................................72 www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 2
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang LIST OF ABBREVIATIONS ANNCAR Announced cumulative abnormal return BIDDERCASH Bidder's cash level BIDDERDEBT Bidder's cash level FINCRISIS Financial crisis FDI Foreign direct investment GPD Gross domestic product MULTIBID Multiple bidders PRIV Private target PRIVSTOCK Private target and the intended method of payment for the merger is stock RELATED Bidder and target are in related industries RESIZE Relative size of bidder over target ROA Return on assets VIF Variance inflation factor WITHCAR Withdrawn cumulative abnormal return www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 1
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang LIST OF FIGURES Figure 4.1: Gross domestic product of Australia (in US Dollar) ..............................26 Figure 4.2: GDP growth rate of Australia (in percentage)........................................27 Figure 4.3: GDP per capita of Australia (in US Dollar) ...........................................27 Figure 4.4: World inflation rate versus Australia inflation rate (in percentage).......28 Figure 4.5: Key foreign investment in Australia by region/areas of origin ..............28 www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 2
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang LIST OF TABLES Table 3.1: Statistical descriptions of variables using in models ...............................22 Table 3.2: Correlation matrix for variables with event window (0, +1) ...................23 Table 3.3: Results of multicollinearity test for sample event window (0,+1) ..........25 Table 4.1: Mean cumulative abnormal returns of proposal announcements ............29 Table 4.2: Mean cumulative abnormal returns of proposal withdrawals..................30 Table 4.3: MHW test for withdrawn abnormal return with event window (0,+1) ...31 Table 4.4: Non-parametric T-test for withdrawn abnormal return with event window (0,+1)......................................................................................................................32 Table 4.5: Bidder’s valuation effects based upon target public status and...............33 Table 4.6: Multivariate analysis result of model 1....................................................35 Table 4.7: Multivariate analysis result of model 2....................................................36 Table 4.8: Multivariate analysis result of model 3....................................................37 Table 4.9: Multivariate analysis result of model 4....................................................38 Table 4.10: Multivariate analysis result of model 5..................................................39 Table 4.11: Multivariate analysis result of model 6..................................................40 Table 4.12: Summary of multivariate analysis results of six models for event window (0,+1) ...........................................................................................................41 Table 4.13: Multivariate analysis result of model 1..................................................46 Table 4.14: Multivariate analysis result of model 2..................................................47 Table 4.15: Multivariate analysis result of model 3..................................................48 Table 4.16: Multivariate analysis result of model 4..................................................49 Table 4.17: Multivariate analysis result of model 5..................................................50 Table 4.18: Multivariate analysis result of model 6..................................................51 Table 4.19: Summary of multivariate analysis results of six models for event window (-1,+1) ......................................................................................................52 Table 4.20: Multivariate analysis result of model 1..................................................55 Table 4.21: Multivariate analysis result of model 2..................................................56 Table 4.22: Multivariate analysis result of model 3..................................................57 Table 4.23: Multivariate analysis result of model 4..................................................58 www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 3
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang Table 4.24: Multivariate analysis result of model 5..................................................59 Table 4.25: Multivariate analysis result of model 6..................................................60 Table 4.26: Summary of multivariate analysis results of six models for event window (-2,+1) ......................................................................................................61 www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 4
Facebook:@Dethivaonganhang www.facebook.com/dethivaonganhang ACKNOWLEDGEMENTS I cannot express enough thanks to my thesis supervisor – Associate Prof., Dr. Nguyen Thu Thuy – for her continued support and encouragement.A complicated quantitative study like this thesis is really a huge challenge in which I have to admit that sometimes I felt lost and demotivated. However, with just a few short talks, Mrs. Thuycould clearly guide me the strategy to complete the thesis, helped me on how to tackle problems, and really inspired me to strive for my best for thestudy. I was also surprised by her professionalism and enthusiasm while I submitted my thesis draft in the evening and could receive so detailed and essential comments for my thesisin just the morning next day. It is my luck to have an opportunity to work with her, in which I can not only complete a good thesis but also learn much from her professionalism and her research skill. I also would like to express my most sincere gratitude to Dr. Cao DinhKien, for all his support and advices. If it would not be Dr. Kien, I could not approach a wide range of highly quality papers and database, and find the idea for this thesis. In addition, thanks to the great knowledge and skills of Dr. Kien about running qualitative models, I can have lots of advices which are crucial for my thesis. I am also indebted my friends with all their helps in this work. For Nguyen Viet Duong, I would like to thank him very much for his sharing about the experience in doing thesis and for guiding and reminding me the basics about statisticsand econometrics. For Hoang Ngoc Anh and Nguyen Duc Hung, thanks to their help, I can access to the database of California State University Fullerton and of La Trobe University, which are the critical condition to complete my thesis. And it does not come to this day by chance, but for all past four years, I owe special thanks to my lecturers and friends at Foreign Trade University for everything they have done for me. And foremost, to my family, words cannot express my gratefulness. For this and more, this is my gift to them. Truong Huy Hoang Hanoi, May 2015 www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 5
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