Resumen
AbstractIn this paper the cumulative average residual (CAR) methodology is used to examine the effect merger announcements have on the returns earned by both the shareholders of the acquiring companies and the acquired companies. The results indicate that shareholders of the acquired companies earn significant positive abnormal returns in the ten weeks prior to the merger announcement. On the other hand no evidence is found of positive abnormal returns accruing to the shareholders of the acquiring companies. Indeed, if anything, the abnormal returns are negative for this group of shareholders. Finally empirical results are presented which indicate the effect on the CAR plots of different research methods. These results indicate that different CAR plots can be obtained from the different methods. However, these differences are not sufficient to alter the overall conclusions of the study.