The information content of mergers and acquisitions announcement for companies quoted at the Nairobi Securities Exchange
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Date
2012-11Author
Omayio, Vincent Mwancha
Type
ThesisLanguage
enMetadata
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The objective of this study was to establish whether Nairobi Securities Exchange market reacts
to merger and acquisition announcements. The study was conducted based on twelve listed
companies that had undergone mergers and acquisition within a period of 10 years beginning 1st
January 2001 to 31st December 2010. The event study methodology was used to analyze on the
returns of the listed companies for a period of thirty days before the mergers and acquisitions
announcements and thirty days after. A model was used to project post-merger announcement
returns for each company. The projected returns were compared with the actual returns and
tested for significance using 95 % confidence level. The study found that there was weak
relationship between company returns for the period before and after the mergers and acquisition
announcements. The regression analysis also revealed that the relationship between the returns
and the dummy variables was not statistically significant. The analysis of the difference between
the projected and the realized returns for the period after the mergers for the companies was
significant recording a Z-value of -50.13 whose absolute value is higher than the critical value
of 1.96. It was therefore concluded that the Nairobi Securities Exchange reacts to any merger
and acquisition announcements. This was evidenced by the instant reaction of share prices after
the announcements. The study recommends that companies should be careful when deciding to
undergo merger and acquisition activity. The merger can bring about enthusiasm or despair as
demonstrated by the reaction of the stock prices of the listed firm after the announcements of
mergers and acquisitions.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
The information content of mergers and acquisitions announcement for companies quoted at the Nairobi Securities Exchange