THE EFFECT OF ACQUISITION ANNOUCEMENTS ON THE RATE OF RETURNS OF ACCQUIRING FIRMS AND TARGET FIRMS IN VIET NAM

Abstract

Merger and acquisition (M&A) is a major decision of firms initiated by various motivations. This analysis aims at identifying motives of M&A by using event study. Despite the short development of M&A in Vietnam and the immaturity of the country’s stock market which limit findings of strong evidence, some significant conclusions about M&A in Vietnam are effectively made. No matter what motives are pursued, target firms consistently benefit from M&A deals. For acquirers, evidence shows that M&A in Vietnam is due to management hubris, and agency problem. This evidence supports studies by Mollers et al. (2004) and Jensen (2004). Evidence for information asymmetry and corporate governance problem at acquirors’ firms is also found, supporting hypothesis by Chang (1998). In addition, results also show that market does not believe synergy is a motive for M&A in Vietnam.