Title: Financial risk assessment in takeover: the effect of bidder firm shareholders' wealth

Authors: Lin Lin, Jenifer Piesse

Addresses: Department of Banking and Finance, National Chi-Nan University, 1 University Rd., Puli, Natou Hsien 545, Taiwan. ' Management Centre School of Social Science and Public Policy, King's College, University of London, 150 Stamford St, London SE1 9NN, UK

Abstract: Motive studies investigate takeover rationale and the wealth effect on bidder shareholders, but with mixed results. Assuming semi-strong efficiency, this paper argues that ambiguities result from the ignorance of the distortion effects of distressed acquirers in the sample. Event studies that monitor market reaction to takeover news allow the examination of relative wealth effects, when non-distressed and distressed bidders are properly separated. Results strongly suggest that the market differentiates between good and bad bidders effectively, despite the noise that frequently accompanies takeover activity.

Keywords: distressed takeover; wealth effects; cumulative abnormal returns; risk assessment.

DOI: 10.1504/IJRAM.2003.003829

International Journal of Risk Assessment and Management, 2003 Vol.4 No.4, pp.332 - 347

Published online: 10 May 2004 *

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