Do Acquiring Firms Gain from Takeovers? Empirical evidence from the Norwegian stock market with a focus on the payment method

Abstract

The objective of this thesis is to examine the economic effect when announcing a takeover in the Norwegian stock market. The research investigates acquisition announcements between 2009 – 2018, where the goal is to see the impact that the payment method has on the abnormal returns. This research has applied event study methodology, finding that the acquiring firm on average experience a negative abnormal announcement return of -1,38%. However, when checking for cash and stock as the payment method, the research finds that cash has a positive significant abnormal return of 2,34% and stock have a negative significant abnormal return of -3,01%. Hence, we find evidence of higher abnormal return when using cash as the method-of-payment. Furthermore, cash is robust and holds when controlling for different measures of payment methods, deal characteristics and firm characteristics. In conclusion, the acquiring firm creates value for its shareholders under certain conditions.