| dc.description.abstract | The purpose of this study was to establish the effects of mergers and acquisitions on shareholder
wealth of listed petroleum companies in Kenya. The population comprised of the listed
petroleum companies in Kenya. The sample comprise of two companies that are listed in the
NSE at the time of the merger, kenolkobil and total. The observations were centered within an
11-day event window surrounding when the announcement for merger was made.
Following Brown and Warner (1985), this study employed event study market methodology to
determine the effect of shareholders wealth. The Market Model was used and residuals were
tested to determine whether or not merger events provided positive or negative abnormal returns
to the participants. It also provided a basis for examining the issue of whether or not shareholder
wealth was enhanced by mergers.
Key findings of the study were two-fold. First, the study established that the share prices of the
two sampled firms did not exhibit significant changes within an 11-day event window. The
results imply that the past Kenyan petroleum industry M&As were not wealth creating projects
for the shareholders of both the bidding entity and the combined entity. Secondly, the findings
showed that the shareholders‟ total cumulated return had not significantly changed due to
announcement (or approval) of a takeover bid. The study concludes that past Kenyan Petroleum
companies M&As were not wealth creating projects for the shareholders of both the bidding
entity and the combined entity. The study recommends that listed companies should be careful
when deciding to undergo merger and acquisition activity. | en_US |
