| It is highly possible that M&A will be a hot issue in the foreseeable future,which is driven by below three reasons:firstly,the nontradable shares reform makes all A shares tradable;secondly,current market valuation is low enough to encourage M&A activities; thirdly,government sponsored many related policies to support M&A market.Given this background,this paper is supposed to study an investment strategy based on M&A activities,to gain abnormal returns.At the same time,this paper is also to test market efficiency of A share market.The analysis of post-announcement abnormal return is to test semistrong-form of market efficiency,while the analysis of pre-announcement abnormal return is to test strong-form of market efficiency or inside information trading. This paper is to use event study to calculate short-term cumulated abnormal return and long-term buy-and-hold abnormal return for both acquirers and targets.When testing short-term M&A wealth effect,I firstly use stock returns during clean period to fit market model,with which I calculate expected returns and abnormal returns of event period.The results show that targets can get significant abnormal returns while acquirers suffer significant losses.Industry,capital ownership and market value are all significant factors to M&A effect.When testing long-term M&A wealth effect,I subtract market return from the buy-and-hold return of the stock,to get buy-and-hold abnormal return.The results show that acquirers can gain higher returns than targets.The inspection of abnormal returns,is at the same time a test of market efficiency.And the empirical results don't support semistrong-form of market efficiency.In some M&A deals,inside information trading is highly possible. |
