Chapter 13: Mergers and Acquisitions in the Shipping Industry: The Effect on Corporate Value
13 Mergers and acquisitions in the shipping industry: the effect on corporate value Osvaldo Rodrigues de Araujo Rios and Heather Leggate McLaughlin 1 Introduction The shipping industry has experienced significant growth in merger and acquisition activity over recent years. The impact of such events on corporate value has not thus far been the subject of extensive research. In the finance literature, it is well documented that mergers can create abnormal returns in the stock markets, particularly in the short term. This chapter documents an investigation into this phenomenon for shipping mergers, on both an industry-wide and a sectoral basis to determine whether there are differences in the way in which share prices respond to such activity. The approach uses share prices as the primary indicator of future cash flow expectations. Assuming that the financial market efficiently reflects these expected future cash flows, positive (negative) expectations will result in higher (lower) than normal returns. Those abnormal returns are thought to reflect the impact of the potential merger on the company value. This methodology has been widely adopted in this type of financial research, in which a market model establishes a benchmark from which to measure abnormal returns around an event window. In this way, it is possible to consider the effect on corporate value of both the target and bidding company around the announcement date. The chapter first explores the existing research, before discussing the data sampling issues. The methodology then draws on established practice in the finance area. Finally, there...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.