CI Essay Example | Topics and Well Written Essays - 3750 words

CI - Essay illustrationAnother impact of this study of effects of spinal fusion emergences is the impact it has on the competitiveness of the post merger household in terms of advantageousness and efficiency. The competitiveness is a critical aspect to be considered by investors and managers before deciding on whether a merger is an appropriate monetary decision to make. The way variant markets react to causas around a merger and specifically the declaration of a merger back be used to reasonably predict the future financial and operational performance of firm in a financial market so long as it is efficient. This enquiry looked at the stock performance of whatever of the listed stocks before a merger announcement and after the announcement. The daily stock prices were renowned and analyzed statistically to highlight the changes in return and correlated with the stated solvent and other similar competing firms stock prices. It was primarily noted that the announcement o f a merger generally resulted in certain changes in the prices of stock. Review of writings points out that there is a negative correlation between the stock returns and hence the value of the firm after an announcement of a merger. This could be explained using hypothesis put forward by behavioral finance scholars. This occurrence empirical study further reinforces the studies in which the post merger firm set as indicated by the stock prices using the cumulative average abnormal returns CAARs reduce with the announcement of a merger, just a few days of the announcement and well after the announcement has reached the public. Introduction Economists and financial analysts are sometimes faced with the challenge of figuring out the magnitude of the effect an economic event has on the underlying value of firms. This implies that they have to measure the impact based on a particular cause or event. To achieve this the event study methods have developed that assist in the anatomical structure of effective models that easily predict the value of a firm based on an event. This is basically an event study that employs residual analysis to evaluate and analyze how a market behaves to an announcement of a merger. A company merger would mean that a company would inherently have more capital size, increase in operations and more diversification. This however does not always result in improved profitability as it could be hindered by excessive costs of acquisition and regulation obstacles. In previous studies it has been noted that an event such as the announcement of a merger had a positive market reaction. This can be investigated using abnormal stock returns noted during such events. As earlier stated the announcement of a merger and or acquisition shall be regarded as the event for the purposes of this study. This research paper has the followers objectives (a) to investigate whether news or any other publicly available information can make for the price pattern s of the acquirer and (b) to examine the impact a merger announcement has on the stock prices of the acquired. The research shall be carried out by comparing the stock prices and daily returns before the merger announcement and instantly after the merger announcement using the daily closing stock prices. This particular paper is create into four sections. The first section shall review the literature on previous research on event studies related to mergers