| A review of historical literature shows that merger and acquisition (M&A) abnormal returns, premiums, and related stock prices have been widely studied. However, a gap in the research regarding analysis of variables determinant of change in systematic risk was identified. Therefore, factors found historically to be associated with the variability in M&A results were studied in relation to systematic risk. Since systematic risk is such an important component of corporate strategy, investment decision making, and finance this analysis was long overdue. Capital Asset Pricing Model (CAPM) Beta was utilized as a proxy for systematic risk. Securities Data Corporation (SDC) M&A transaction data, Standard and Poor's COMPUSTAT, and The University of Chicago's Center for Research on Security Prices (CRSP) financial data were utilized. Determinants of change (pre vs. post merger) in acquirer systematic risk, within the manufacturing industry, were analyzed. After correlation and regression analysis, multiple variables are identified to be statistically significant in determining changes in systematic risk. A 473 M&A transaction sample yields an average pre-transaction acquirer systematic risk near that of the overall market (Average Pre-Transaction Beta = 0.9903). Post transaction results show a 0.2454 decrease in beta on average (Average Post-Transaction Beta = 0.7449). |
