Do mergers and acquisitions announcements create value for acquirer shareholders in Africa

Abstract

This study provides evidence of positive abnormal returns earned by shareholders of acquirers upon merger and acquisition (M&A) announcements on African markets. We observed significant cumulative abnormal returns for wider windows up to 25 days before and after M&A announcements. Confidentiality about pending merger announcements is poorly held, resulting in significant information leakage occurring up to six trading days. Further, we establish that firm industry, mode of payment, and nature of acquisition significantly influence abnormal returns. Finally, the paper found strong positive effect of firm-specific factors (firm size and return on equity) on investor's investment decisions following a merger announcement.