OCCUPATION TIMES AS A TEST OF ESSENTIALITY: THE CASE OF MERGERS AND ACQUISITIONS

Jau-Lian Jeng ； Daniel Park ； Michaël Dewally

《Advances in Quantitative Analysis of Finance and Accounting》 14期 (2016/12) Pp. 171-204

https://doi.org/10.6293/AQAFA.2016.14.06

摘要

This paper introduces an alternative methodology for event studies as in Jeng (2015) and applies it to the case of mergers and acquisitions. The methodology develops alternative test statistics that are based on the occupation times of cumulative abnormal returns when exceeding some arbitrary thresholds. The statistics for the length of responses using cumulative abnormal returns will converge to the occupation time of a reflected Brownian motion under the null when the corporate events are not influential. In addition, by applying the Banach-valued Central Limit Theorem on these occupation times across all firms, and under the null hypothesis that the corporate events are not essential corporate events, the test statistics based on cross-sectional average of these occupation times will converge to a normally-distributed random variable with mean and variance provided by Takacs (1998). Application of the test statistics on the stock returns of acquiring firms shows, unlike conventional methods, that mergers and acquisitions are essential corporate events such that the market adjusts to the announcements faster than the occupation time of a reflected Brownian motion. This shows that the announcement of a merger and acquisition actually resolves the uncertainty the capital markets have regarding the corporation's future.

關鍵字

Reflected Brownian Motion ； Mergers and Acquisitions ； Occupation Times

參考文獻

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