The diversification discount and takeovers : some Australian evidence

Nankervis, Michael and Singh, Harminder 2012, The diversification discount and takeovers : some Australian evidence, International journal of managerial finance, vol. 8, no. 1, pp. 36-57, doi: 10.1108/17439131211201022.

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Title The diversification discount and takeovers : some Australian evidence
Author(s) Nankervis, Michael
Singh, HarminderORCID iD for Singh, Harminder
Journal name International journal of managerial finance
Volume number 8
Issue number 1
Start page 36
End page 57
Total pages 22
Publisher Emerald Group Publishing Limited
Place of publication Bingley, England
Publication date 2012-02
ISSN 1743-9132
Keyword(s) Australia
Acquisitions and mergers
Summary Purpose – The purpose of this paper is to examine the existence of a diversification discount in the Australian takeover market. A sample of 446 Australian publicly-listed firms involved in the market for corporate control was observed between 2000 and 2007. The authors examined two pre-announcement and four post-announcement periods, predominantly around the immediate event date, but also examined activity out to one year following the announcement.
Design/methodology/approach – An event study, in this case, is used to examine abnormal returns around the announcement of a merger or acquisition. The timeframe this study intends to focus on is the period from announcement date to a time one year down the track which, although some studies may deem it “long-term”, is still a relatively short-term measure of performance.While many variables in acquisitions have been looked at in depth over the years, such as outcome, nature, payment method and size of deal, one area which has had considerably less attention is the area of specialisation and diversification. That is, do focus increasing (or non-diversification) deals have different return patterns relative to focus decreasing (or diversification) deals?
Findings – The overall findings of this paper are fairly mixed, barring a few exceptions, and there does not appear to be a great deal of variation in return patterns based purely on whether the announced acquisition is non-diversifying or diversifying in nature.
Originality/value – The paper is of particular value in Australia. Most of the research of diversification to date has taken place in the USA. Australia is similar to the USA in that it has a well-developed economy based on common law principles and an active equity market, however, the existence of institutional and regulatory differences suggests that US results may not hold in Australia.
Language eng
DOI 10.1108/17439131211201022
Field of Research 150205 Investment and Risk Management
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2012, Emerald Group Publishing Limited
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