Dissertation Gary J Ford Oct 2005[1]

Merger Timing, Payment Method and Firm

Size Effects on Shareholder Wealth; An

Event Study of UK Acquiring Companies

for the years 1992 and 2000

_____________________________________________________________________

Gary Joseph Ford

K0433159

___________________________________________________

DISSERTATION

PGMFS

MA Accounting and Finance

October 2005

Supervisor: Dr. Stuart Archbold

Gary J Ford K0433159 II MA Accounting & Finance

Abstract

This dissertation examines a sample of 74 mergers in the UK, focussing on the

Acquiring company. This sample is sub-divided into two years, namely 1992 and the

year 2000, so as to examine the effect of the timing of the mergers in a period of low

activity (1992), and a period of high activity (2000). In total, 29 companies were

identified for 1992, and 45 for the year 2000. This sample was then further broken

down by firm size, by payment method, and combinations of firm size and payment

method. The primary event window used was -1 to +1 days, with various other

windows used for means of comparison.

Overall, it was found that the majority of results produced were insignificantly

negative, and the Efficient Market Hypothesis was not supported by the observations.

The hypotheses concerning firm size, payment method and firm size with payment

method were supported by the results, but the remaining five hypotheses formulated

in this dissertation were not supported. Thin trading may have been a problem with

some of the results, as no control was used. The sample size was also relatively small

in some of the sub groups, which may have made the results even more insignificant.

Gary J Ford K0433159 III MA Accounting & Finance

Declaration

�I declare that this Dissertation is all my own work and the sources of

information and material I have used (including the Internet) have

been fully identified and properly acknowledged as required.�

Gary J Ford K0433159 IV MA Accounting & Finance

Acknowledgements

I wish to thank my Supervisor, Stuart Archbold for his excellent

guidance.

I wish to thank my parents for their continuous support in me, without

whom, this degree would not have been possible.

I also wish to thank my southern family Alex, Izzie, Kirk and Lee for

their friendship and support throughout the year.

Gary J Ford K0433159 V MA Accounting & Finance

Contents

Abstract II

Declaration III

Acknowledgements IV

List of Acronyms VI

List of Tables VII

List of Illustrations VIII

Chapter 1: Introduction P 1

Chapter 2: Literature Review P 3

Chapter 3: Methodology and Data Sample P 18

Chapter 4: Results P 23

Chapter 5: Conclusions P 43

References P 48

Appendices P 51

Screen Dump P 68

Gary J Ford K0433159 VI MA Accounting & Finance

List of Acronyms

AR Abnormal Returns

AAR Average Abnormal Returns

CAAR Cumulative Actual Abnormal Returns

EMH Efficient Market Hypothesis

Gary J Ford K0433159 VII MA Accounting & Finance

List of Tables

Table 1: Previous General Results Summary P 08

Table 2: Previous Merger Cycle Results Summary P 11

Table 3: Previous Firm Size Results Summary P 13

Table 4: Previous Payment Method Results Summary P 15

Table 5: Number of Companies in each Sub Group P 19

Table 6: CAAR All Companies P 24

Table 7: CAAR Small Sized Firms P 27

Table 8: CAAR Large Sized Firms P 29

Table 9: CAAR Cash Payment Method P 31

Table 10: CAAR Equity payment Method P 33

Table 11: CAAR Small Firm Size with Cash Payment Method P 35

Table 12: CAAR Small Firm Size with Equity Payment Method P 37

Table 13: CAAR Large Firm Size with Cash payment Method P 39

Table 14: CAAR large Firm Size with Equity Payment method P 41

Gary J Ford K0433159 VIII MA Accounting & Finance

List of Illustrations

Graph 1: CAAR All Companies -10 to +10 Days P 25

Graph 2: CAAR Small Size -10 to +10 Days P 28

Graph 3: CAAR Large Size -10 to +10 Days P 28

Graph 4: CAAR Cash payment -10 to +10 Days P 32

Graph 5: CAAR Equity Payment -10 to +10 Days P 32

Graph 6: CAAR Small & Cash -10 to +10 Days P 36

Graph 7: CAAR Small & Equity -10 to +10 Days P 36

Graph 8: CAAR Large & Cash -10 to +10 Days P 40

Graph 9: CAAR Large & Equity -10 to +10 Days P 40

Chapter 1: Introduction _____________________________________________________________________

Gary J Ford K0433159 1 MA Accounting & Finance

Chapter 1:

Introduction

The purpose of this dissertation is to add to the empirical evidence on the subject of

Mergers and Acquisitions, and their effect on the wealth of the shareholder. It is an

analytical / explanatory piece of research, and does not presume to make any original

findings. The process used throughout is quantitative, as the vast proportion of the

work will be analysing the abnormal movements in share prices of the acquiring firm.

As mentioned, this research will be to add to the existing body of empirical evidence,

so it is therefore, in its nature, pure / basic research. The logic behind the research is

deductive, as theory will be tested against empirical evidence.

Chapter 2 discusses the theoretical framework, empirical evidence and previous

results, and concludes with a formulation of several hypotheses concerning the

predictions of the results. Chapter 3 will examine the methodology employed to the

calculations of the event study, and details of the sample used. In Chapter 4, there is a

discussion and analysis of the results of the event study, and some summary

conclusions are made. Chapter 5 makes conclusions on the results and offers

explanations as to possible reasons for the results.

The effect of Mergers and Acquisitions (M&A) on shareholder wealth is a widely

covered research area. Empirical evidence would seem to suggest that the average

return to shareholders is zero, with the target company tending to make a more

significant gain. In the US, studies by Agrawal et al (1992) and Jensen & Ruback

(1983) show evidence of returns to the acquiring company being significantly

negative. UK research seems to be far more inconclusive than US studies. Results

vary, especially concerning the acquiring company, with more often than not a

negative return also being observed (Gregory 1997; Limmack 1991; Higson & Elliot

Chapter 1: Introduction _____________________________________________________________________


1993). Methods employed have included examinations of methods of payment, the

size effect and more recently, the merger cycle.

There appears to be lack of conclusive evidence on the effect of merger cycles, and in

particular, a combination of the effect of merger cycles, payment method and firm

size together on shareholder wealth. The purpose of this dissertation will be to add to

the empirical evidence concerning the effects of timing of mergers on shareholder

wealth of acquiring companies. Acquiring companies have been selected as opposed

to target companies, due to there being less conclusive evidence. This investigation

will be carried out using an Event Study, employing Abnormal Returns (AR�s),

Average Abnormal Returns (AAR�s) and Cumulative Average Abnormal Returns

(CAAR�s), during periods of low merger activity (1992) and high merger activity

(2000). First, timing will be investigated, as will payment method and firm size. Next,

timing coupled with payment method, followed by timing coupled firm size will also

be investigated. Finally, timing, payment method and firm size will all be investigated

simultaneously, with a view to determining the significance of the factors and

combinations of factors, and a ranking of that significance.

Chapter 2: Literature Review _____________________________________________________________________


Chapter 2:

Literature Review

Within this chapter, there contains an examination of the theory behind the M&A

phenomena, and an exploration of the previous empirical results. The theoretical

framework is first examined in an attempt to establish a number of the major theories

as to why M&A takes place. Several other theories are also identified, although they

are not examined at such depth, as the focus of this examination is related solely to

the major theories.

Following the theoretical framework is a review of the available literature on M&A,

and in particular, the specific issues that are to be more thoroughly examined. These

issues include the research into, and empirical evidence concerning the Efficient

Market Hypothesis (EMH); differences in results of the target and acquiring

company; differences in the UK results in contrast to the US results; the effect of the

timing of mergers and the condition of the economy; the effect of the payment method

employed; and the effect of the size of the bidding firm.

Throughout these particular areas of interest, there is a systematic review of several

criteria. These include the views, both opposing and supportive of several previous

researchers; the event window used; the methodology employed; the benchmark used;

the results of the research concerning whether the effects of M&A is a value creating,

preserving or destroying process, and the significance of those findings. A more

substantial examination of the methods will be later reviewed in the Methodology in

Chapter 3.



2.1. The Theoretical Framework

In an attempt to explain the motivations behind the activity of M&A , and indeed the

empirical results, a theoretical framework has been developed, detailing several

possible reasons why M&A takes place. A crude method of organising these theories

is to group them into two classes, namely, theories supporting the motivations behind

M&A are solely for the benefit of the shareholder, and the maximisation of their

wealth; and that M&A takes place for reasons other than maximising the

shareholders� wealth.

The first two of the five major theories fall under the former category. These are the

Neo-Classical Theory, and the Synergy theory. These theories help to explain the

positive effects on shareholder wealth experienced as a result of merger activity. The

empirical evidence section in this chapter will further investigate these results.

Neo-Classical theory assumes that managers make decisions based on the best-

interests of the shareholder (Arnold, 2004). Within the context of corporate

acquisitions therefore, the decision to engage in such activities will be measured by

the potential affect the event will have on the share price of the company. In

particular, this means whether the event will increase, sustain or decrease the share

price (Parkinson & Dobbins, 1993). A popular method of measurement is the Net

Present Value technique, which concludes that if a project has a NPV of at least zero,

nothing has been lost in terms of wealth. If it is assumed that the takeover of another

company will increase, or at least sustain shareholder wealth, then management will

further consider accepting the implementation of a takeover. However, if it is assumed

that the process of engaging in a merger will decrease the value of the company�s

shares (i.e. a NPV of less than zero), then the decision will be made not to go ahead

with the opportunity.

The concept of Synergy assumes that the combined entity of the target and bidding

company will achieve synergistic benefits, and for all wants and purposes will be of a

value greater than the sum of its parts (Parkinson & Dobbins, 1993). These benefits

can be either operational or non-operational in nature. Operational benefits are such

gains as those from sharing resources, for example, using one external auditor for the

combined entity, as opposed to one for each of the two separate entities (Arnold,



2004). Non-operational benefits include activities such as growth (particularly organic

growth), and the advantages of enabling faster growth and thus further increasing

operational benefits through economies of scale, and a greater market segment and/or

power (Limmack, 1991). The nature of this particular investigation will not be

examining the criteria used in the assessment of synergy gains, and as such, no real

conclusive judgements will be made on whether the nature of the findings can be

explained through synergy per-say.

Shareholder wealth maximisation may not be the motivation of a merger. Instead,

reasons could include the personal motivations of the management team. Systems are

in place to help protect the shareholder from such activities, by recognition of Agency

Theory. Within Agency Theory, it is assumed that shareholders need protecting from

potential abuse of power, or indeed accidental misinterpretations or inaccuracies, by

management (Arnold, 2004). This is particularly concerned with the publications of

the Annual General Reports (AGR�s). Such issues as external audit and transparency

have been evolved to aide shareholders. Because of this, managers should find it

increasingly more difficult to take part in activities that solely or mainly benefit their

own interests at the expense of the shareholder. With the existence of Agency Theory,

and the steps taken to alleviate the lack of trust of managers by shareholders, it should

logically be less likely that management will primarily pursue their own benefits.

However, as will be seen in the review of empirical evidence, negative returns to

shareholders, both long and short term, are experienced. As such, three major theories

help to explain the reasons behind this. These theories are known as Maximising

Management Utility, Hubris and Disciplinary.

Maximising Management Utility theory assumes that the motivation for partaking in

takeover activities is centred on management fulfilling their own needs and personal

objectives, or increasing their utility (Franks & Harris, 1989). An increase in salary or

power may serve them to directly increase their utility by allowing them to buy a

bigger house, or be placed in a position to control a vaster business empire with more

subordinates, also boosting their status and ego. This theory helps to explain negative

returns experienced by the acquiring company. However, managers may not

necessarily knowingly engage in value decreasing mergers.



Therefore, this theory may not necessarily be a good explanation of a negative return.

The same can be true of a positive return. Because a positive return is experienced,

this may simply be an added bonus to management. The management may be

experiencing personal benefits, and the positive return experienced to the shareholders

may not matter to them. A more detailed examination of management remuneration

would be required to determine their personal monetary gains. However, it would be

unlikely that if the motivation was simply concerned with ego or empire building,

management would admit to this.

It is also true that although a merger or takeover may reduce the share price of the

company, it may be necessary to survive, and in turn, increase the wealth of the

shareholder in other ways (ibid). This may be by preserving the life of the company

and the investment made by the principles (or shareholders), or by placing the

company in a position to achieve a longer term strategic advantage, with the potential

to increase the shareholder wealth at a later time (ibid). It can therefore be argued that

management may not always work directly to maximising shareholder wealth, but

may do so in a more indirect method. Thus, the immediate wealth created by M&A

may not be the greatest measurement of the benefits to the shareholder, or basis to

apply a theory to explain the phenomena.

Hubris Hypothesis, first brought to light by Richard Roll (1986) argues that it is not

necessarily the intention of the manager to engage in value decreasing activities,

rather, an error of judgment in the valuation of the project has been made. Roll (ibid)

describes the motivation for the merger as management seeing a company that may be

underperforming, with financial qualities inherent with a good target. In this situation,

it will be judged that the company is an ideal target, and a decision to pursue a

takeover should be made. In an attempt to acquire the target, the bidding company

will overpay, beyond the true value of the target in order to win any bidding battle

with other potential acquirers.

Once the target has been acquired, the winner of the battle is the one who has been

willing or able to pay more than other competitors. Therefore, they are said to have

the winners curse (Parkinson & Dobbins, 1993), as they have over paid, and if they



wanted to sell the company, they would have to sell it for less in order for another

company to be able to afford to purchase it. In this situation, they are forced to retain

the investment.

With Hubris, the wealth of the shareholder is shadowed by the desire to grow, and

thus increase the managers� status and power (Limmack, 1993). Again, as with

Maximising Management Utility Theory, the managers are placing their own needs

ahead of the owners�. In this case, the price paid for the target is more than the sums

of its assets are worth in a financial sense, and possibly a strategic sense too.

Disciplinary Theory relates to the Agency Theory issues of trust, as mentioned earlier

in this chapter. Within Disciplinary Theory, the market is seen to be a market of

corporate control. Companies whose managers under-perform in the maximisation of

shareholder wealth will be subject to takeover, and removed from their position by

more effective managers from the bidding company (Limmack 991). It is therefore in

the best interests of managers to ensure that investments made by the company

increases the wealth of its owners. Thus, companies that have been acquired should

experience a wealth gain as the effect of a new, more efficient management team

should help to raise the share price. According to Parkinson & Dobbins (1993), a

market for corporate control will prevent managers from making investment decisions

that are not in the shareholders� best interests. It is fair to assume then, that for the

acquiring company, positive results to shareholder wealth should also be experienced.

One method of checking this would be to examine any takeover attempts of a

company that has acquired another firm, and as a result, reduced shareholder wealth.

It would be fair to assume that such a company will have become a target itself.

2.2. The Empirical Evidence

2.2.1. General M&A Results

Despite the vast amounts of research into the area of M&A, there still appears to be

no conclusive evidence as to whether they are value creating, preserving or destroying

events on the wealth of the shareholder. The outcomes of event studies and other

research provide for mixed results. Results seem to differ from the acquiring company



and the target company, whether the study is focussed on US or UK companies, and a

variety of other parameters. Evidence suggests that on average, the overall return toTable 1: Previous General Results Summary

Researcher

Sample Size / Year

UK

US

Bidder

Target

Event

Window

Result

B (T)

Period

Data

Comment

Parkinson & Dobbins

(1993)

190 / 1975 - 1984

UK T Month

Announced

(+7.91%) Monthly

Gregory (1997)

403 & 452 / 1984 - 1992

UK B & T

Comb.

Month

Announced

-3.0%

(CAPM)

Monthly

Limmack (1991)

500 / 1977 - 1986

UK B & T Bid Period 0 Monthly

Sudarsanam et al (1996)

420 / 1980-1990

UK B & T -20 to +40

Days

-4.04% Daily

Barnes (1978)

39 / 1974 � 1978

UK B Month 0 to

+1 Month

0 Monthly Minor +ve Pre;

Major �ve Post

Announcement Agrawal et al (1992)

937 / 1985 � 1987

US B +1 Month to

+12 Month

-1.53% Monthly

Note on Abbreviations: Comb. Is for Combined; +ve is for Positive; -ve is for Negative; Lge is for

Large; Sml is for Small

the shareholders of the acquiring company are zero, whereas returns to the target

company are positive.

Efficient Market Hypothesis (EMH) suggests that in a perfect market, the reaction to

new information will be immediate, and any errors will be consequently corrected

immediately. If this is the case, then there should be no abnormal return witnessed in

the share price of any companies involved in M&A activity (Dodds & Queck). It is

fair to say that any abnormalities should be minimal. However, if abnormalities do

exist, then the efficiency of the market is brought into question, as is the theory of

EMH. Table 1 presents a summary of various studies carried out in both the UK and

the US, and for bidder and target companies.

As can be seen by Table 1, there do appear to be abnormal returns in the market.

These returns are a combination of negative, zero and positive abnormalities. Results



vary, yet the return to the acquiring company appears to be mainly negative, although

in some situations, positive results have been identified (Limmack 1991).

In the US, studies by Agrawal et al (1992) show evidence of returns to the acquiring

company being significantly negative, with -1.53% abnormal return experienced by

the acquiring company. The sample size used was 937 US Companies during the

period of 1985 through 1987. UK research seems to be far more inconclusive than US

studies. Results vary, especially concerning the acquiring company, with more often

than not a negative return also being observed (Gregory 1997; Limmack 1991; Higson

& Elliot 1993).

Parkinson & Dobbins (1993) examined a sample of 190 companies in the UK,

between the years of 1975 and 1984. They found that on average, the target company

experienced a positive return of 7.91%, claiming that it is the M&A event that

provides the positive returns. However, Gregory (1997) found that a combined return

of both the bidder and target companies surrounding announcement was negative at -

3.00% using the CAPM Model, and negative with the other models used. EMH

suggests that on average, the abnormal return should be zero, which implies that there

will be some positive as well as negative returns that balance out to zero. Parkinson

and Dobbins (ibid) claim that the adjustment process of the market was slow, which is

inconsistent with EMH. They also discovered that when the firm�s size was taken into

account, the results were less negative, as was the case when equity was used rather

than cash to finance the M&A.

Sudarsanam et al (1996) find that the bidder loses 4.04% on average, and that

ownership structure has a significant effect on returns. They associate Hubris with the

results, claiming that they are inconsistent with Synergy Theory. They also note that

Equity financed mergers produce smaller gains then cash or mixed payment methods.

It appears from these results that the payment method may have an effect on the

wealth of the shareholder.

Limmack (1991) finds in his study of 500 companies from 1977 through 1986, that

there is no overall net wealth decrease to shareholders. However, the bidding firms

shareholders experience a negative return, whereas the target company shareholders



experience a significant gain. This is complimentary to EMH, as it shows that

although small increases or decreases are experienced, overall, a net effect of zero is

achieved. Barnes (1978) also finds an overall gain of zero. He discovered that in his

sample, there were small price increases leading up to the merger, and relatively

larger decreases immediately afterwards. This could indicate a leak of information to

the market, meaning the market adjusted to the previous abnormal gains. It has been

theorised by various researchers, including Shama & Mathur (1989) that Mergers

follow an abnormal rise in share prices. This could help to explain Barnes� (1978)

results.

2.2.2. Merger Timing

The theory of Merger Waves suggests that mergers come in waves, with several

hypotheses as to why this happens. Various researchers, including Town (19920,

Resende (1999) and Golbe & White (2001) all agree that the phenomena of merger

waves are indeed real, and have a significant effect on the wealth of shareholders.

Shama & Mathur (1989) find that merger waves are related to the conditions of the

economy, and that causality plays a part in the share price of companies. They claim

that a strong economy causes an abnormal rise in share prices, and that these

increased prices, coupled with increased liquidity, cause a wave of merger activity.

Harford (2004) supports this theory, and further finds that economic, regulatory

and/or technological shocks also drive merger waves. He also notes that these shocks

can aggregate over time, and again, dependant on overall capital liquidity, can cause a

surge of merger activity. Harford (ibid) reasons that Neo-Classical theory is a good

explanation, and that sufficient Liquidity is needed for the wave to occur. This

supports the findings that just prior to merger waves, the economy is particularly

strong, meaning either over valued stocks or increased liquidity, perhaps caused by

the overvalued stocks (Shama & Mathur 1989).

Blackburn & Raven (1992) note that there are substantive cyclical regularities across

countries, as well as time. They remark on the UK following the US into a wave of

high activity on several occasions. Crook (1995) discusses Destabilising Pressure

hypothesis, whereby a company will attempt to recover lost profits due to a sudden



change in the competitive environment via corporate takeovers. The results of Crook

(ibid) seem to support this theory.

Table 2: Previous Merger Cycle Results Summary

Researcher

Sample Size / Year

UK

US

Bidder/

Target

Event

Window

Result

B (T)

Period Comment

Moeller et al (2005)

1998 - 2001

US B -2 to 0

years

0 to +2

years

C 0.02%

Eq -0.65%

C -1.53%

Eq -5.74%

Yearly 1990 � 1997

= +ve

1998 � 2001

= -ve

Agg. Major -ve Note on Abbreviations: +ve is for Positive; -ve is for Negative; C is for Cash Payment; Eq is for

Equity Payment

When examining the office for National Statistics, merger activity appears to have

booms and busts, much like the business cycle. This could be due to several reasons.

Arnold (2004) discusses the trends of companies expanding to become

conglomerates, and then divest to achieve synergy. Arnold (ibid) also discusses the

strategy of following the competitors lead in an effort to survive. M&A is discussed

as an activity of survival in itself. Because M&A�s cost so much money, perhaps they

have to be spaced out, as companies need time to recover earnings.

Empirical evidence concerning the timing of M&A�s suggests that periods of high or

low activity have an effect on the generated return. Higson & Elliot (1998) and

Gregory (1997) acknowledge the effect of merger activity on shareholder wealth

generation. Higson & Elliot (1998) dissect their findings into sub periods, note

significant differences in results, and compare to Agrawal et al�s (1992) US study, yet

they do not explain those results.

Agrawal et al (1992) find that Franks et al (1991) results of returns being non-

significantly negative are specific to the period they studied, namely 1975 � 1984. By

examining Table 2, it can be seen that in the study carried out by Moeller et al (2005),

in the period of lower M&A activity (1990 � 1997), more positive gains were



experienced, whereas in the period of higher activity (1998 � 2001), more negative

gains were experienced.

M&A�s which occur in times of low activity may then be considered to be more

strategically orientated to the core strategies, rather then fighting to survive? There

appears to be a gap in this area of research, in so far as there is not as much empirical

evidence on the subject as other factors such as benchmarks, payment methods, or

firm size. Researchers such as Sudarsanam & Mahate (2003) discuss �Glamour

Acquirers� and �Value Acquirers� in terms of payment method. Perhaps this is also

true of the timing of the merger.

Another explanation could be that Managers recognise their stocks are overvalued,

and thus decide to spend the extra money on investing in an acquisition. By paying for

this acquisition with the overvalued stock, although they may make an initial loss on

the share price, that loss only really balances out the abnormal overvaluation to the

correct level. Thereby, they have managed to actually increase the value of the

company.

2.2.3. Firm Size

Research into size effects suggests that small-firms tend to make a larger gain than

large-firms. Moeller et al (2004) found that acquiring firms lost an average of $23m

US upon announcement between the years of 1980 and 2001, claiming the existence

of a size effect. Moeller et al (ibid) also observed that the return for small sized

acquiring firms was 2% higher than for larger firms, and irrespective of method of

payment and other deal characteristics. Agrawal et al (1992), when employing the

Returns Across Time and Securities (RATS) method, adjusted for firm size, also

found that US takeovers were unambiguously, on average, wealth reducing for

acquiring companies.

Higson & Elliot (1993) and Limmack (1996) studied size effects in the UK. In both

studies, the Dimson & Marsh (1986) size-decile control method was used, and

significant negative abnormal returns were observed during the event, but long run

negative abnormal returns were seen to be insignificant. These results appear to

follow much US versus UK based research, in that UK evidence is less conclusive.



Moeller et al (2004) suggest several reasons why small firms outperform large firms

in acquiring companies. Under free cash flow hypothesis, it is believed that managers

wishing to grow their empire would rather partake in M&A than reward shareholders

with dividends. Generally, they suggested that incentives of managers in small firms

Table 3: Previous Firm Size Results Summary

Researcher

Sample Size / Year

UK

US

Bidder/

Target

Event

Window

Result

B (T)

Period Comment

Higson & Elliot (1998)

830 / 1975 � 1990

UK B Month

Announced

All +0.43%

Lge +0.02%

Monthly

Kennedy & Limmack

(1996)

247 / 1980 � 1990

UK B & T -3 to -1

0 to +1

-12 to -1

+2.92%

-0.16%

+14.17%

Daily Size based

Decile used to

control for size

Limmack (1993)

525 / 1977 � 1986

UK B & T Month

A to C

-0.64% Monthly Size based

Decile used to

control for size

Dimson & Marsh (1985)

862 / 1975 � 1982

UK B & T -13 to +24 Negative Monthly

Chan et al (1985)

20 portfolio�s

1953 � 1977

US B & T Various Small Firms

= Higher

Ave. Results

Monthly Due to higher

Beta�s

Moeller et al (2004)

12,023 / 1980 � 2001

US B -1 to +1

Days

+ve

-ve for L&E

Daily

Note on Abbreviations: Month A is Month Announced; Month C is Month Completed; Ave. is for

Average; +ve is for Positive; -ve is for Negative; L&E is Large firm with Equity Payment

are better aligned with those of shareholders in large firms (ibid), meaning a more

positive return for acquiring firms.

From examining the results of Kennedy & Limmack (1996), it can be seen that the

period of twelve days leading up to the announcement day provides for a large gain.

This could again be supportive of the merger cycle theory. The loss experienced from

day zero to day +1 shows a loss, which is complimentary of EMH, as it shows the

market has balanced out the abnormal from the period of -3 to -1.

Generally speaking then, it is fair to assume that smaller firms will experience larger

gains than larger firms. This could also be due to the fact that they do not have as



much money to spend, and ergo, as much to overpay with. So far, it may also be fair

to comment that the combination on a low period of merger activity coupled with a

the acquiring firm being of a smaller size may produce a smaller loss, or larger gain to

their shareholders� wealth.

2.2.4. Payment Method

Research into payment method suggests that generally, cash financed acquisitions

provide more positive return than equity. The choice of issuing equity over cash

shows a lack of confidence in the investment, and causes a dilution of shares, where

as cash shows confidence and generates tax benefits (Arnold 2004). Agrawal et al

(1992) found that equity financed acquisitions generate significant negative post

acquisition returns, whereas cash financed acquisitions are not significantly different

from zero. Work by Franks et al (1991) which suggested the opposite, was dismissed

by Agrawal et al (1992), claiming their results could be explained by the time period

in which the M&A activity occurred.

Mitchel et al (2004) emphasise the relevance of arbitrageur hypothesis, where there is

a pressure effect on share price of the acquiring company when equity is used, due to

activities of arbitrageurs. Equity signalling hypothesis, as reported by Myers & Majluf

(1984), is behind their observations of equity issuing firms reporting a loss, due to a

signalling that the market has overvalued the assets. This is supported by Travlos

(1987), who observed that equity issuing firms generate poor returns. There is much

evidence to suggest that cash financed acquisitions generate more positive returns.

As previously mentioned, mergers, or to be more precise, merger waves, generally

follow an increase in stock valuation, and that this increase could indeed be an

overvaluation. If this is the case, then perhaps the loss experienced by companies

using equity to finance a takeover is not an effect of the merger, but an effect of the

market correcting the overvaluation. EMH is assumed to immediate, however, as we

have seen by previous results (Parkinson & Dobbins 1993), the market an be slow to

react to information. Therefore it may be fair to suggest that the loss experienced post

announcement is an effect of the lag in the efficiency of the market, rather than the

event of the merger.



By using stock then, managers are using a proportion of funds that do not really exist

as they are the overvalued part of the share price. By doing this, they are in effect

creating value for the company, as they are parting with theoretical value rather than

actual cash. This is similar to getting something for nothing. Although shareholders

experience a loss in wealth due to the Shareprice decreasing, it is more of a Table 4: Previous Payment Method Results Summary

Researcher

Sample Size / Year

UK

US

Bidder/

Target

Event

Window

Result

B (T)

Period Comment

Franks et al (1991)

399 / 1975 � 1984

US B & T -5 to +5

Days

All -1.02%

C +0.83%

Eq -3.15%

Daily

Dodds & Queck (1985)

70 / 1974 - 1976

UK B Month

Announced

-1.49% Monthly

Travlos (1987)

167 / 1972 - 1981

US B -5 to +5

Days

C More +ve

E More -ve

Daily

Sudarsanam & Mahate

(2003)

519 / 1983 - 1995

UK B -1 to +1

-1.43% Daily Various

Benchmarks

(Size Adjusted

shown)

Note on Abbreviations: C is for Cash Payment; Eq is for Equity Payment

correction, and a return to a more real value. The company has also acquired a new

company, and has experienced growth, which could assist in the survival of the new

entity. Therefore, a long term gain may be felt by the shareholders, due to effects of

synergy.

2.2.5. Formulation of Hypotheses

From the empirical evidence, a number of hypotheses have been formulated, and

summarised below.

H1. M&A�s during periods of low activity should result in a more

significant increase in shareholder wealth, as mergers should be more

strategically, and less glamour or utility-orientated.



M&A�s occurring during periods of high activity should result in a

more significant decrease in shareholder wealth, as mergers should be

more glamour or utility-orientated, and less strategically-orientated.

H2. M&A�s concerning small size firms should generate a more positive

increase in shareholder wealth, as smaller companies are less able to

pay large amounts for acquisitions and in turn over pay less. Managers

in small size firms are more geared towards shareholders expectations.

M&A�s concerning large sized firms should generate a greater

decrease in shareholder wealth. This is due to the facts that larger

companies are able to pay more for acquisitions, and in turn over pay

more. Elements of managerial motives and empire building also

suggest that shareholders interests are not put first.

H3. M&A�s with cash as the major payment method should generate a

more positive increase in shareholder wealth, as this payment method

signals confidence to the market, ownership does not become diluted,

and tax benefits are generated.

M&A�s with equity as the major payment method should generate a

greater decrease in shareholder wealth, as this payment method signals

a lack of confidence to the market, and a dilution in ownership.

H4. A combination of Small firm size and low merger activity should

produce smaller losses or larger gains than a combination of a large

firm in a period of high activity..

H5. A combination of cash payment method and low merger activity

should produce more positive gains than a period of equity payment

method and high activity.



H6. A combination of small firm size and cash payment method should

produce a more positive gain than a small firm size with equity as

payment method

H7. A combination of a large firm size and cash payment method should

produce less of a loss than a combination of a large firm size and

equity payment method

H8. A combination of low M&A activity, small firm size and cash financed

should produce the most positive and returns.

A combination of high M&A activity, large firm size and equity

financed should produce the most negative returns.

Chapter 3: Methodology & Data Sample _____________________________________________________________________


Chapter 3:

Methodology & Data Sample

3.1. Data and Sample

A selection of 74 companies has been selected from Thomson Data Stream from the

years 1992 and 2000. These years have been selected as 1992 is a year of relatively

low merger activity, and the year 2000 is a period of relatively high merger activity

(Arnold, 2004). The sample for 1992 contains only 29 companies, which may lead to

the results being insignificant.

The next stage is to identify which companies are to be classified as large, and which

ones as small. The criteria for this separation are the market value (MV) of the

company at the announcement date. A company will be deemed to be classed as small

if their MV is below £800 million and large if their MV is above this figure. This

figure has been selected as it appears to be a point at which no companies are

particularly close to this value.

The next step is to separate the companies in terms of payment method. Fortunately,

the companies in this sample are either 100% cash or 100% equity financed.

Finally, the primary event window to be used will be -1 to +1 days. This has been

used a standard window, and captures the 3 days surrounding the event day zero.

Various rsearchers ahave used this window including Sudasanam & Mahate (2003).



Table 5: Number of Companies in each Sub-Group

NUMBER OF COMPANIES Group All Years 1992 2000

All 74 29 45 Small 49 24 25 Large 25 5 20 Cash 45 12 33

Equity 29 17 12 Small & Cash 28 9 19

Small & Equity 21 15 6 Large & Cash 17 3 14

Large & Equity 8 2 6

3.2. Justification of Methodology The change in shareholder wealth is to be measured using the standard event study

methodology. This is because it uses share price returns and is a favourite method

among various researchers such as Fama et al (1969).

This methodology is effective when employed under the Efficient Market Hypothesis,

as it can measure the reaction of the market to within days of the event. Accounting

based methodologies such as Ratio Analysis fall under criticism as they can be subject

to manipulation. This causes problems when interpreting the results, which can

potentially be inaccurate. Therefore, the event study methodology results are more

reliable, as it is less possible to manipulate share prices (Binder 1985).

According to EMH, any new information should be immediately incorporated by the

market, and the share price adjusted accordingly. Therefore, the information on a

merger, which may cause abnormal changes to share price should be immediately

corrected to show zero abnormal returns (Ibid). The Event Study Methodology

measures this by calculating Abnormal Returns around the event.

The first step is to collect the share price information of the sample. The share prices

will be collected from Thomson Data Stream, and the information on the market

index will be collected from the FTSE ALL SHARE. This will also be gathered using

Thomson Data Stream.

The event period will then be identified. This will be two hundred and ninety-one

days before to forty days after. The announcement day will be identified from this



information and the observations will be grouped into common event time (t = 0),

from t = -291 to t = 40, where the announcement day will be time t.

The first step is to group the observations into common event time t = 0. This is done

by finding the announcement day and marking it as t = 0. Information of t = -291

through to t = 40 is then collected.

The second step is to calculate the actual returns to the company. There are two

methods of calculating this, namely the Discrete Returns and Logarithmic Returns.

Logarithmic Returns are sometimes preferred to Discrete Returns as they are more

likely to be normally distributed, and they are easy to accumulate. However, for the

purpose of this event study, the actual returns experienced by the shareholder are

required. Therefore, the Discrete Returns Method will be used. The equation for the

discrete returns is:

(1) 1,

1,,,,

−

−−+=

ti

titititi P

PDPR

The return on the market index is calculated in the same way; using the FTSE ALL

share price index.

The next step is to calculate the expected return. In order to do calculate the expected

return, the actual returns are first calculated for a period before the event. A

regression is then run using the control benchmark, and the expected returns are

calculated. There are several available to choose from, each with its own merits.

Different researchers have used different benchmarks, or a variety of them in their

studies. Each benchmark will produce different results, but on the whole, the

difference in results will be marginal (Dyckman et al 1984)

For the purpose of this paper, a period of -290 days to -41 days will be used. This

period is presumably unaffected by any leaks of information to the market.



The market model has many positive reasons to be selected. It produces a smaller

variance of Abnormal Returns meaning that the statistical tests are more powerful.

The smaller correlation across abnormal returns provides for uniformity to the

statistical tests. However, the small form effect has a significant impact on the model

(Ibid).

The problem of thin trading can occur. This thin-trading, or non-synchronous trading,

occurs when the closing share price at the end of the day�s trading relates to a

transaction before that day. As a result of this, downward bias of the Beta and an

upward bias of the estimation of abnormal returns is experienced. There are several

methods for correcting this bias. They include the Scholes and William�s procedure,

the Dimson Aggregate Coefficients Method and the Fowler and Rourke procedure.

For the purpose of this paper, due to time restraints, a control for thin trading will not

be included.

The market adjusted model is only useful if the average of the companies� Betas are

close to one. This model is also affected by the size affect problem.

The Capital Asset Pricing Model (CAPM) is rarely used, as it produces no real

benefits over the previous models, yet requires more information input to be

calculated. It has been used as a comparable model in several papers including

Dimson and Marsh 1985.

The Mean Adjusted Model helps to reduce some size-effect bias problems. Its major

flaw is in the assumption of a constant Beta and risk premium over the long run

period (Kennedy and Limmack 1996; Limmack 1993; Chan et al 1985).

More complex models have been developed that use multiple factors. These include

the Fama & French (1996) Multi-index Model. However, the differences in results

appear to be minimal.

Due to several factors, including time restrictions, and compatibility with significant

testing, the control benchmark to be used will be the market model.



(2) ( ) titmiiti RRE ,,, εβα ++=

The next step is to calculate the abnormal Returns. To do this, the following equation

is used:

(3) ( )ititit RERAR −=

Where: itAR : Abnormal Return of firm i on day t

itR : Actual Return of firm i on day t ( )itRE : Expected Return of firm i on day t

Following this, the Abnormal Returns are then summated to form the Average

Abnormal Returns of the sample group. The equation used for this is:

(4) ∑=

=N

iitt ARAAR

1

Finally, the Average Abnormal Returns are then accumulated over each of the event

windows (-1 to +1; -5 to +5; -10 to +10; -40 to +40; -10 to -1; 0 to +1; 0 to +5) to give

the Cumulative Average Abnormal Returns. This is done using the following

equation:

(5) ∑=

=T

itT AARCAAR

1

The CAARS will then be put through one sample T test using SPSS. This two-tailed

test will calculate the significance of the means. SPSS will be used as it is readily

available and preferred for its simplicity. From the T-Test, as well as the level of

significance, the standard errors will also be calculated

Chapter 4: Results _____________________________________________________________________


Chapter 4:

Results

This Chapter reports the results from the event study. It has been broken down into

several sections, concentrating on each of the sub-groups of companies. The main

focus is on the 3-day event window of -1 to +1 days, with comments and analysis also

on the other windows examined.

4.1. Group 1: All Companies

As can be seen from Table 6, the majority of the results for each of the event windows

in the all years, and 1992 (low activity) were negative returns to the acquiring

company. However, the returns t the year 2000 figures (high activity), show some

positive returns.

The 3-day event window of -1 to +1 days produced an overall return of -2.13% for the

sample. This compliments results from Gregory (1997) with -3.00%, and Sudarsanam

et al (1996) with -4.04%. When examining the period -10 to -1 days, it can be seen

that a positive result was achieved, albeit a small gain of a mere 0.04% increase. The

period of 0 to +1 days however, produces a negative effect of -1.76%, which more

than cancels out the gain. It is also worth noting that the period of 0 to +5 days

produces a smaller loss, meaning the loss experienced over days +2 through +5 were

smaller than the period of 0 to +1.

This may be seen to be consistent with the theory of Efficient Market Hypothesis, as

the gains achieved before the announcement day were corrected after the day, and the

effect continued to be reduced. This lag in correction compliments the findings of

Parkinson & Dobbins (1993). This small loss is statistically insignificant.

For the period of -40 to +40 days, through all years, the loss was a massive -9.46%.

This loss is significant at the 1&% level. Similar losses of -9.66% and -9.34% were

Chapter 4: Results _____________________________________________________________________


Table 6: CAAR All Companies

CAAR All Companies Event Window All Years 1992 2000

-1 to +1 -0.021279 -0.035705 -0.011982 -5 to +5 -0.015293 -0.049937* 0.007033

-10 to +10 -0.011991 -0.040193 0.006183 -40 to +40 -0.094649*** -0.096553** -0.093423** -10 to -1 0.000449 -0.008532 0.006236 0 to +1 -0.017640 -0.032755 -0.007900 0 to +5 -0.010260 -0.032739 0.004227

Significance at *10%; **5%; ***1% Levels

felt for the years 1992 and 2000 respectively. Both of these years showed a

significance at the 5% level.

In 1992, the year of low M&A activity, in the period of 1 to +1 days, a slightly larger

loss of -3.57% was observed. This loss is closer to the findings of Gregory (1997)

than the overall group loss from both years. However, in the year 2000, the year of

high M&A activity, a loss was again observed, but this was smaller than the loss in

1992, at just -1.19%. This loss is consistent with Agrawal et al (1992), who observed

a negative result of -1.53%.

In 1992, losses were observed for all of the event windows. With the exception of the

-5 to +5 days window loss of -4.99% at a level of 10% significance, and the -40 to

+40 window at 5% significance, all other observation were insignificant. These

negative results are consistent with Hubris Hypothesis, and discredit EMH

The year 2000 observations were a mixture of positive and negative results. While the

windows of -1 to +1 days and 0 to +1 days both showed insignificant negative effects

at -1.19% and -0.79% respectively, the period of -10 to -1 days showed a small gain

of 0.63%. This result was insignificant however. The positive results observed are

small at less than 1%, and statistically insignificant.

These results are unexpected when examining the literature in Merger Waves. From

this literature, I hypothesised that the effect of a merger in a year of high activity

would produce a greater loss than for a merger in the year of low activity. When

Chapter 4: Results _____________________________________________________________________


Graph 1: CAAR All Companies -10 to +10 Days

-0.03

-0.02

-0.01

0

0.01

0.02

-10 -8 -6 -4 -2 0 2 4 6 8 10

Event Day

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All Years19922000

examining all of the event windows of the year 2000, it can be seen that the losses

were smaller than all of the equivalent 1992 windows. The results of the period -10 to

+10 days can be seen in Graph 1.

When examining Graph 1, we can see that on Day Zero, all years experienced a

negative return, with 1992 showing the most negative compared to 2000 showing the

least. Year 2000 results show that they made a faster recovery and showed positive

returns on day +3, compared to 1992 taking until day +4 to show a positive abnormal

return. Results appear to look positively correlated on the whole, although the level of

that correlation is unknown due to no co-efficient tests being carried out.

With the exception of the window -40 to +40 days, all of the results for the year 2000

were statistically insignificant. In the year 1992, just two event windows showed

significance. Overall, the most significant results were the -40 to +40 days, with

negative results of around -9.5%. The T tests (Appendix VIII) show that the window

-40 to +40 days results were all around -2 standard deviations from the mean. It can

also be seen from Appendix VII, that the standard error was considerably small at

around 0.0005 for each year.

Overall for this sub group, it can be seen that for all years combined, the results appar

to be negative. This shows that Hubris is a likely explanation, although other

synergies may have been achieved. However, with the share price information alone,

Chapter 4: Results _____________________________________________________________________


a measure of these synergies is not possible. For the year of low merger activity,

again, negative results are experienced.

The surprising result is that in the period of high activity, the results were either less

negative, or they were positive. For the year of 1992 then, it may also be true that

Hubris is the explanation behind the mergers. Whereas for the year 2000, the

shareholders best interests may well have been at heart. This again goes against

Merger Cycle expectations of a period of higher activity showing negative results

over a period of lower activity, as experienced by Moeller et al (2005). However, the

majority of these results show no significance, with the only significant result for

2000 being the -40 to +40 days window. Perhaps Disciplinary, or Neo-Classical

Theory can explain these results best, as they show that in 2000, shareholder wealth

was increased.

4.2. Group 2: Size Effect

This group has again been divided into two sub groups of small sized firms and large

sized firms. Both will be examined and compared with each other.

4.2.1. Small Firm Size

The Event window of -1 to +1 days for all years shows a negative result of -1.52%,

and a 10% level of significance. All of the event widows for the combined years show

negative results, with the windows of -40 to +40 days and 0 to +1 days showing

significance at the 1% level. Another massive loss, of -13.06% was observed at -40 to

+40 days, suggesting either an early leak of information, or delayed losses. Although

it is possible some unrelated event happened to cause these losses, it is unlikely that

an unrelated event happened throughout all of the years within the 80 day period of

the announcement date. The 1% level of significance loss of -1.31% experienced at

the 0 to +1 days window shows again that the market may be slow to adjust, and that

perhaps Hubris or another non-shareholder wealth enhancing theory could best

explain the results.

When examining the year 1992, it can be seen that a larger negative return of -3.51%

occurred in the -1 to +1 day window. Similar levels of negative returns were

experienced throughout this year, with the period of 0 to +1 day showing a larger loss

Chapter 4: Results _____________________________________________________________________


Table 7: CAAR Small Sized Firms

CAAR Small Size Event Window All Years 1992 2000

-1 to +1 -0.015231* -0.035085 0.003828 -5 to +5 -0.008294 -0.053522** 0.035125*

-10 to +10 -0.010252 -0.039378 0.017709 -40 to +40 -0.130614*** -0.111096** -0.149351*** -10 to -1 -0.001943 -0.008268 0.004130 0 to +1 -0.013083*** -0.031793 0.004877 0 to +5 -0.001773 -0.035768 0.030863


of -3.18% than the pre-announcement period of -10 to -1 days at -0.83%. However,

neither of these results were significant. The period of -40 to +40 days showed a

negative return of -11.11% with 5% significance. These results are consistent with

Dimson & Marsh (1985) who also experience negative results. This is the only

window where the year of low activity produced more positive returns than the year

of high activity.

The year of high activity again outperformed the year of low activity for increasing

shareholder wealth. Positive returns were experienced throughout, with the exception

of the -40 to +40 days window. At the -1 to +1 window, a gain of 3.83% was

achieved, and a larger gain 4.88%at the 0 to +1 period. These positive results are

consistent with the positive gains reported by Moeller et al (2004). However, the

observations yet again go against the Hypothesis that the year of low activity would

experience more positive gains than the year of high activity.

When examining the t test, it can be seen that for the combined years, the period of -1

to +1 days lies outside of -3 standard deviations from the mean (Appendix VIII ). The

most shocking result is the window of 0 to +1, which shows the result to be an

unbelievable -531 standard deviations from the mean. Upon re-running this test time

over, the same result is experienced. I can not offer any explanation to the severity of

this result. The Significance is also at the 1% level, and the standard error is at

0.00001, showing that much of the abnormalities have been explained by the small

firm-size effect.

Chapter 4: Results _____________________________________________________________________


Graph 2: CAAR Small Size -10 to +10 Days

-0.03

-0.02

-0.01

0

0.01

0.02

-10 -8 -6 -4 -2 0 2 4 6 8 10

Event Day

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Graph 3: CAAR Large Size -10 to +10 Days

-0.04

-0.03

-0.02

-0.01

0

0.01

0.02

-10 -8 -6 -4 -2 0 2 4 6 8 10

Event Day

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When examining the Graph 2, it can be seen that from day -6, 1992 experienced

negative returns, that hit the lowest point at day zero. Positive abnormal returns were

not observed until day four. The year 2000 experienced mixed observations, with a

positive abnormal return experienced on day zero. The level of correlation is again

unknown, but by examining the graph, it can be seen that all results follow a similar

path.

These results again show that the efficiency of the market has been questioned. They

also show disregard for the hypothesis that mergers in a period of low activity will

show more positive gains than a merger in a period of high activity.

Chapter 4: Results _____________________________________________________________________


Table 8: CAAR Large Sized Firms

CAAR Large Size Event Window All Years 1992 2000

-1 to +1 -0.033133 -0.038683 -0.031746 -5 to +5 -0.029012 -0.032728 -0.028082

-10 to +10 -0.015400 -0.044103 -0.008225 -40 to +40 -0.024159 -0.026746 -0.023512 -10 to -1 0.005136 -0.009798 0.008869 0 to +1 -0.026570 -0.037371 -0.023870 0 to +5 -0.026893 -0.018199 -0.029067


4.2.2. Large Firm Size

For the large sized firm, it can be seen that for all of the event windows, with the

exception of -10 to -1 for 1992 and 2000, losses were observed. However, none of

these losses were significant. For the window of -1 to +1 days, negative returns of

over 3% were observed, with 1992 again showing heavier losses than 2000.

The period of -10 to +10 days shows positive results of 0.51% overall, with -0.98%

for 1992 and a gain of 0.89% for 2000. This suggests that due to the small losses, a

possible error in calculation was made on behalf of the management rather than any

Hubris, as the loss was made in the year of low activity. However, because the firm is

a large size, it may be assumed that the management were willing to overpay.

In the window of 0 to +1 days, negative returns are observed, with -2.66% for the

combined years, -3.74% for 1992, and -2.39% for 2000. For the period of -40 to +40

days, the severity of the negative returns is much less than that of the complete sample

group, or the group of small size companies.

When examining the Graph 3, it can be seen that large negative returns were

experienced on the announcement day, with the biggest loss being suffered in 1992.

After the announcement day, 2000 experiences returns closer to zero than 1992, with

2000 experiencing more positive returns again than 1992 from day 6 onwards.

The Hypothesis that firms in a period of high activity will make greater losses is again

not supported by the results. However, the sample size is reduced, with 1992 being

under 30 companies, which is a benchmark for significance testing.

Chapter 4: Results _____________________________________________________________________


4.2.3. Comparing Small Size with Large Size Performance

Overall, for the combined years, the small sized companies achieve more less

negative results than do the large size firms. For the combined years, only the event

window of -40 to +40 days shows the small sized firms producing a more negative

result. This is complimentary of the hypothesis H2, that small size firms will produce

more positive results than large size firms.

For the year of 1992, the small size firms produce a less negative result for four out of

the seven event windows, namely -1 to +1, -10 to +10, -10 to -1 and 0 to +1 days.

This is again consistent with the hypothesis that small sized firms will outperform

large sized firms.

For the year 2000, the small sized firms produced positive gains with the exception of

-40 to +40 days, compared to the large sized firms producing negative results, with

the exception of -10 to +10 days. These two event windows are the only times when

the large sized companies produce a more positive return than the small sized

companies. These results support hypothesis H3.

However, the large sized firms produce a smaller loss in the period of high activity

than the small sized firms produce in the year of low activity. This does not bode well

with the hypothesis H4, that larger firms in periods of high activity should generate

more negative observations than small sized firms in periods of low activity.

On a whole for both sub groups, the period of high activity produced more positive

returns than the period of low activity. This is not supportive of the hypothesis H1.

The combination of positive and negative abnormal returns also suggests that the

market may not be as efficient as EMH would suggest. The Negative results also

suggest Hubris, whereas the positive results seem to be consistent with Neo-classical

theory.

Chapter 4: Results _____________________________________________________________________


Table 9: CAAR Cash payment method

CAAR Cash Payment Event Window All Years 1992 2000

-1 to +1 -0.014404** -0.008606 -0.016514 -5 to +5 0.001941 -0.017245 0.008918

-10 to +10 0.019654 -0.009788 0.030361 -40 to +40 -0.042934 -0.072046 -0.032347 -10 to -1 0.014530 0.007539 0.017072 0 to +1 -0.010413 -0.005422 -0.012228 0 to +5 -0.000963 -0.012723 0.003313

significance at *10%; **5%; ***1% Levels

4.3. Payment Method

AS with the previous group, the two types of payment method will be examined

independently, and then compared with each other.

4.3.1. Cash Payment

From examining Table 8 above, we can see that during the event window of -1 to +1

days, all years combined experienced a negative return. For the combined years, this

return was -1.44%, with significance at the 5% level. This result is contradictory of

Franks et al (1991) who found that cash payments produced a positive gain of 0.83%.

However, Dodds & Queck (1985) found that cash produced results of -1.92%,

whereas equity financed mergers produced returns of 0.78%. The result for 1992 is

also negative at -0.86%, and a smaller loss than the year 2000 -1.65%, complimenting

the hypothesis H1. The small loss in 1992 appears to be consistent with EMH,

however, when examining the Graph 4, it is clear that the abnormal returns from day

to day are sporadic, moving from negative to positive. Both results are not consistent

with theories of mergers being value preserving or enhancing.

The window of -10 to -1 produces positive results for all three years, with 2000

making the most positive gain of 1.71%, compared to just 0.75% of 1992. This

contradicts the hypothesis H1, but shows that in 1992, the market appears to be more

efficient. Neo-classical theory could be used to explain these results, as they show a

positive effect for the wealth of the shareholder.

The window of 0 to +1 days shows an extremely small loss of -0.09% for the

combined years, which again suggests the market is efficient. In 2000, the loss is

Chapter 4: Results _____________________________________________________________________


Graph 4: CAAR Cash Payment -10 to +10 Days

-0.02-0.015-0.01

-0.0050

0.0050.01

0.0150.02

-10 -8 -6 -4 -2 0 2 4 6 8 10

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Graph 5: CAAR Equity Payment -10 to +10 Days

-0.06-0.05-0.04-0.03-0.02-0.01

00.010.020.03

-10 -8 -6 -4 -2 0 2 4 6 8 10

Event Day

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slightly larger at -1.22%. When again examining the Graph 4, it is clear that neither

share price returns to a smooth pattern, nor were they running along the smooth

pattern of expected returns up to -10 days before. While the 2000 and combined years

see a negative return on day zero, the 1992 prices increase to over 1%, then drop to

over 1.5%. For the majority of the event windows, excluding -1 to +1 and 0 to +1

days, the year 2000 returns were more positive than those of the 1992 returns. On a

whole this is contradictory of hypothesis H1, but the two exceptions are the most

important observations, showing that H1 is complimentary with these results. All

results except the All years -1 to +1 days were insignificant.

Chapter 4: Results _____________________________________________________________________


Table 10: CAAR Equity Payment Method

CAAR Equity Payment Event

Window All Years 1992 2000 -1 to +1 -0.031946 -0.054834 0.000478 -5 to +5 -0.042036 -0.073014 0.001851

-10 to +10 -0.061097* -0.061655 -0.060307 -40 to +40 -0.174898*** -0.113852* -0.261381** -10 to -1 -0.021402 -0.019876 -0.023563 0 to +1 -0.028854 -0.052048 0.004005 0 to +5 -0.024685 -0.046868 0.006742


4.3.2. Equity Payment

For the window of -1 to +1 days, an overall loss of -3.19% was observed. This is

complimentary of the results observe by Franks et al (1991), who observed -3.15% for

equity financed mergers. When examining the sub periods however, 1992 made a

greater loss of -5.48%, and 2000 made a gain of just 0.04%. Whereas the 2000 figure

suggests efficiency in the market, the 1992 figure does not. From examining the

Graph 5, it can be seen that while 2000 prices rose at day zero before shifting between

positive and negative returns, the 1992 prices fell to -5% on the announcement day,

and continued to remain negative until day 3. The gain observed in the 2000 share

prices again contradicts the hypothesis H1.

The period -10 to +10 shoed a loss of around -6% for all three sub periods, with the

combined years achieving significance at the 10% level. For the window of -40 to

+40, all three sub periods again experienced losses. The combined years achieved

significance at the 1% level with a massive loss of -17.49%, the year 1992

experienced a loss of -11.39% at a significance level of 10% and the year 2000

showed losses of a massive -26.14% and a level of 5% significance. The losses over

this period seriously contradict EMH.

For the event window 0 to +1 days, 1992 reports a loss of -5.20%, compared to the

gain of 0.40% in 2000. These results again contradict the hypothesis H1. All of the

results are negative, save four event windows in the year 2000. This may suggest

Hubris in 1992, although the small insignificant gains in 2000 do not necessarily

suggest Synergy or Neo-classical theory.

Chapter 4: Results _____________________________________________________________________


4.3.3. Comparing Cash with Equity Performance.

Overall, for all combined years, the cash payment method produces less negative

results than the equity financed mergers, supporting hypothesis H3. The same is true

for the sample from 1992, where all results are again negative, and the cash payment

method observations are less negative, again supporting hypothesis H3. However, for

the year 2000, the same is not always true. Cash produces less negative or more

positive results than equity for the event windows of -5 to +5 days, and for -40 to +40

days. For the other event windows, equity outperforms cash as a payment method,

contradictory to hypothesis H3.

The more positive observations in the year 2000 show that a combination of equity

payment and high activity produce more positive gains than a combination of cash

payment method and high activity. It is not true that cash payment method and low

activity produce larger positive gains than a combination of equity payment method

and high activity. This is contradictory to hypothesis H5.

Thin trading may be responsible for the dramatic results of the event window -40 to

+40 days, as there was no control applied to the control benchmark. Overall, cash

payment has outperformed equity payment method. This is complimentary of results

from Travlos (1987) and Sudarsanam et al (2003) who found cash produced positive,

while equity produced negative observations.

4.4. Group 4: Small Firm Size with Payment Method.

Small firm size will first be analysed with cash as a payment method, and then with

equity as a payment method. Finally, they will both be compared.

4.4.1. Small Firm Size with Cash Payment Method

For the window -1 to +1 days, it can be seen that in the combined years a small

insignificant loss of -0.07% was made. In 1992, there was again a loss, but much

larger at -1.00%. However, in the year 2000, there was a small insignificant gain of

0.37%. This contradicts Hypothesis H1 yet again, as well as hypotheses H6 andH8,

whereby a combination of low activity along with cash payment and small firm size

Chapter 4: Results _____________________________________________________________________


Table 11: CARR Small Size with Cash Payment Method

CAAR Small & Cash Event Window All Years 1992 2000

-1 to +1 -0.000712 -0.010001 0.003687 -5 to +5 0.019493 -0.020593 0.038481

-10 to +10 0.034133* -0.010226 0.055145** -40 to +40 -0.042281 -0.072576 -0.027931 -10 to -1 0.003427 0.010503 0.000075 0 to +1 -0.001132 -0.007248 0.001766 0 to +5 0.018868 -0.019907 0.037235


should produce the smallest loss or most positive gains, as the high activity year

produces the highest returns. All results are insignificant however, and by now the

sample size is considerably reduced to below 30 companies per sample, further

reducing the significance.

The period of -10 to -1 days provides positive observations for all year combinations

in this sub group. The 1992 observations show a higher return at 1.05% as compared

to 0.007% returns of 2000. The 2000 returns a complimentary with EMH as the gain

is so small. Overall for this event window, a gain of 3.43% is achieved. This also

supports hypotheses H1, H6 and H8, as well as Synergy Theory, or perhaps

Disciplinary.

For the event window 0 to +1 days, while a negative result is observed for 1992 at an

insignificant -0.72%, a positive gain is observed in 2000, with a small insignificant

0.18%. These results are both small and support EMH as well as Disciplinary Theory.

The Hypotheses of H1, H6 and H8 are not supported however.

In the event window -10 to +10, the All Years result shows a positive gain of 3.41%,

which is significant at the 10% level. Where as there is a small insignificant gain for

this window in 1992, there is a significant gain at the 1% level of 5.51%. This is a

large gain, and contradicts EMH, as well as the hypotheses H1, H6 and H8.

When examining Graph 6, it can be seen that all years make a gain on day zero

following a loss, which is then followed by a small positive gain at day +1. This is as

expected from Neo Classical theory, and Disciplinary Theory.

Chapter 4: Results _____________________________________________________________________


Graph 6: CAAR Small & Cash -10 to +10 Days

-0.03

-0.02

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Graph 7: CAAR Small & Equity

-0.12-0.1

-0.08-0.06-0.04-0.02

00.020.04

-10 -8 -6 -4 -2 0 2 4 6 8 10

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4.4.2. Small Firm Size with Equity payment Method

As with the small firm size and cash payment method results, the observations here

for the window of -1 to +1 days produces negative returns overall and for 1992, but

positive returns for the year 2000. The negative return for combined years is -3.46%,

which is reasonably higher than zero, again questioning the EMH. The even higher

loss of -5.01% in 1992 is again contradictory to EMH. The 2000 sample shows a

small positive gain of 0.42%. Moeller et al found that small firm size combined with

equity produced a positive gain of 2.02% over the 3-day window of -1 to +1 days, so

these results are not particularly aligned with their results. As can be seen from Graph

7, in 1992, day zero produced a negative return of around 4%, in 200 the return was

over 2% positive. These results do not conform with hypotheses H1, H7 or H8.

Chapter 4: Results _____________________________________________________________________


Table 12: CAAR Small Firm Size with Equity payment Method

CAAR Small & Equity Event Window All Years 1992 2000

-1 to +1 -0.034590 -0.050135 0.004274 -5 to +5 -0.045344 -0.073281 0.024500

-10 to +10 -0.069432* -0.056870 -0.100840 -40 to +40 -0.248392*** -0.134208** -0.533852*** -10 to -1 -0.009102 -0.019531 0.016971 0 to +1 -0.029020 -0.046520 0.014728 0 to +5 -0.029294 -0.045285 0.010684


The results of the period -1 to +1 are not statistically significant however, but show a

possible reasoning for Hubris.

For the event window -10 to -1 days, negative returns are again observed for

combined years and for 1992. The combined years show a loss of -0.09%, whereas

1992 shows a loss of -1.95%. The year of high activity however shows a gain of

1.69%. This again is contradictory to hypotheses H1, H7 and H8. The window of 0 to

+1 days shows that as with the period of -1 to +1 days, the higher activity period

produces a more positive gain of around 1% These results could be as a result of

Hubris for 1992 and Disciplinary or Neo-Classical Theory for the year 2000.

Interestingly, in the period of -10 to +10 days, all years combined show a loss of -

6.94% which is significant at the 10% level. The year 1992 shows a smaller

insignificant loss of -5.69%, but the year 200 shows the greatest loss of -10.08%. This

could be due to the massive loss of almost 10% on day +8, which may or may not be

a result of thin trading.

Event window of -40 to +40 days show some significantly negative results. For the

combined years, the result is -24.84%, and significant at the 1% level. For 1992, the

observation is a smaller -13.42%, with a less significant 5% level. However, for the

year 2000, the result is a massive loss of -53.39%, with significance at the 1% level.

This clearly shows either a massive error of judgement, or more than likely Hubris as

the explanation for the result, as well as contradicting EMH.

Chapter 4: Results _____________________________________________________________________


4.4.3. Comparing Small Size & Cash with Small Size & Equity Performance

When examining the event window of -1 to +1, the small size with cash produces

considerably less negative returns in both the combined years and in 1992 than the

small size with equity as the payment method. In the combined years, the return for

the small size and cash is -0.07% compared to the equity financed equivalent of -

3.45%. In 1992, the observations are -1.00% for cash and -5.01% for equity. This

shows that for these sub-time periods, the small size paired with cash produces less

negative results. Although the returns generated in the hear 2000 are a positive 3.68%

for cash, and a higher gain of 4.27% for equity, this is only 0.05% higher. All of these

figures are insignificant. The results show that the period of higher activity produces

higher positive gains, which is contradictory to the Hypothesis H1. The Higher

positive gains of cash compared to equity compliment hypotheses H7 and H8, and the

large positive and negative gains overall again contradict EMH.

For the window of -10 to -1 days, cash payment method produced small positive gains

in combined years and 1992, whereas equity payment produced small negative

returns. This supports Hypothesis H7 and H8. However, in the year 2000, the cash

financed small companies produced a mere 0.0075% gain, compared to the 2000

companies� 1.69% gain. This shows that H1 is not supported.

Finally for the event window of 0 to +1, equity payment produced a larger loss for the

combined years and 1992, when compared to the cash payment, again complimenting

hypotheses H7 and H8. However, in the year 2000 sample, equity again produced a

higher gain in comparison. This does not support Hypothesis H1.

All together, this sub group supports Hubris hypothesis for combined years and

periods of low activity, and Disciplinary for periods of high activity. Cash

outperformed equity for increasing shareholder wealth, with the exception of the year

2000 sample. The results were inconsistent with EMH.

4.5. Group 5: Large Sized Firms with Payment Method

The combination of small sized firms with cash will first be addressed, then small size

with equity. Finally they will be compared and contrasted with one another.

Chapter 4: Results _____________________________________________________________________


Table 13: CAAR Large Firm Size with Cash Payment Method

CAAR Large & Cash Event Window All Years 1992 2000

-1 to +1 -0.032942 -0.004422 -0.039053 -5 to +5 -0.020100 -0.007204 -0.022863

-10 to +10 -0.001171 -0.008476 0.000394 -40 to +40 -0.049651 -0.070454 -0.044675 -10 to -1 0.014717 -0.001353 0.018160 0 to +1 -0.022003 0.000058 -0.026730 0 to +5 -0.026005 0.008828 -0.033469


4.5.1. Large Size with Cash Payment

The event window of -1 to +1 days produced negative observations throughout all the

year groups. In 1992, the year of low activity, the return was much less negative at

just -0.04%, compared to the -3.91% experienced in the year 2000. This is

complimentary with Hypothesis H1 that a year of low activity will produce less

negative gains than a year of high activity. The results produced are not expected

when examining Moeller et al (2004), who found that a large firm using cash

produced a positive return of 0.69%. The negative observations suggest Hubris, as

negative returns are expected in a year of high activity. The negative returns for 1992

could be due to valuation errors. The results generated in this study were not

statistically significant however.

For the window of -10 to -1 days, it can be seen that overall, the return produced was

a positive 1.47% for the combined years. The year of low activity produced a small

negative of -0.14%, whereas in the year 2000, the return was positive at 1.82%, which

is not expected with hypothesis H1.

Mixtures of positive and negative returns were observed for the 2-day event window

of 0 to +1 days. Overall the combined years produced a negative return of -2.20%,

1992 produced a small positive of 0.005%, and the year 200 produced a negative

return of -2.67%. The small positive return suggests that the market is efficient for the

year of low activity, but the larger negative suggests the market was less efficient in

the year of high activity.

Chapter 4: Results _____________________________________________________________________


Graph 8: CAAR Large & Cash -10 to +10 Days

-0.04-0.03-0.02-0.01

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Graph 9: CAAR Large & Equity -10 to +10 Days

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When examining the Graph 8, it can be seen that on day zero, whilst the year 2000

returns dropped to around -3%, the 1992 returns reached a positive of around 0.5%.

The period of -2 to 0 saw negative returns for both years, whereas in the period

following day zero, sporadic positive and negative returns were observed for both.

4.5.2. Small Size with Equity Payment

Negative returns were observed for the event window of -1 to +1 days for all of the

year groupings. However the returns of the year 2000 were less negative at -0.33%,

compared to the 1992 returns of -2.84%. This observation does not support hypothesis

H1. Overall the all years combined return was a small negative at -0.98%. Moeller et

al (2004) found that for large sized firm using equity as their payment method, a

Chapter 4: Results _____________________________________________________________________


Table 14: CAAR large Firm Size with Equity Payment Method CAAR Large & Equity

Event Window All Years 1992 2000 -1 to +1 -0.009577 -0.028358 -0.003317 -5 to +5 -0.037493 -0.087575** -0.020799

-10 to +10 -0.038683 -0.095409* -0.019774 -40 to +40 -0.019016 -0.109336 0.011090 -10 to -1 -0.052949 -0.019504 -0.064098 0 to +1 -0.009450 -0.017644 -0.006719 0 to +5 -0.011103 -0.052810* 0.002800

significance at *10%; **5%; ***1% Levels negative return of -0.96% was observed, meaning that these results are complimentary

of their findings. All results however, were statistically insignificant.

For the window -10 to -1, all results were again negative, and insignificant. Overall,

for all years combined, a large -5.29% was observed. For 1992, a smaller -1.95% was

observed and for the year 2000, the negative return stood at -6.72%. The greater loss

in the year of higher activity is supportive of hypothesis H1. Hubris or Maximising

Management Utility may be reasons behind these losses.

The window 0 to -1 days again shows negative results, with -0.95% for all years

combined, -1.76% for 1992, and a smaller -0.67% for the year 2000. This smaller loss

for the year 2000 is not supportive of hypothesis H1, and the results suggest the

market is slow to react.

Significant results were found at the -5 t +5 window for 1992, with a loss of -8.76%

significant at the 5% level. Again for 1992, a loss of -9.54% was observed at the

window -10 to +10 days with significance at the 10% level. For the event window of

0 to +5 days, a negative observation, again in 1992, of -5.28% was observed, with

significance at the 10% level. These results suggest inefficiency in the market and

possible Maximising Management Utility or Hubris.

When examining the Graph 9, large losses are followed by large gains for all year

groupings, providing for inconclusive results. This group had he fewest number of

companies, which may account for this.

Chapter 4: Results _____________________________________________________________________


4.5.3. Comparing Large Size & Cash with Large Size & Equity Performance

For the event window of -1 to +1 days, the combination of large size with cash

produced larger losses than the combination of large size with equity for both the

combined years, and for the year 2000. However, in 1992 the large and cash

combination produced smaller losses than the large and equity group. Due to the

smaller number of companies in the 1992 sample for this group, results prove to be

inconclusive. The hypothesis H8, which assumes that the large & cash & high activity

will produce the most negative results was not found in this event window.

In the event window of -10 to -1, the large size and equity combination produced

larger losses than the combination of large and cash for all of the year groups. This is

consistent with hypothesis H7. Hypothesis H8 was supported by these results.

The event window of 0 to +1 observed that the large and cash again produced less

negative results than the large and equity combination, which supports Hypotheses H7

and H8.

Chapter 5: Summary & Conclusions _____________________________________________________________________


Chapter 5:

Summary & Conclusions

The Hypotheses generated at the end of the literature review have been supported in

some of the results, but not in others. Also, the Efficiency of the market has been

questioned, as has the theory behind the objectives of the mergers, be they Hubris,

Disciplinary or Synergy. Throughout the results, the primary event window of -1 to

+1 days will be the under scrutiny.

Hypothesis H1:

This Hypothesis suggested that overall, mergers during low activity should produce

lower negative returns, or higher positive returns. For the 1st group of all companies in

the entire sample, negative returns were experienced for all of the three year

groupings. The returns for the period of low activity (1992) were more negative than

for the period of high activity (2000). This does not support this hypothesis. The

negative returns also suggest an inefficiency in the market.

The second group, concerning the effect of size, also found that the high activity

sample produced less negative returns than the low activity group, again not

supporting the hypothesis. The negative gains also brought the efficiency of the

market into doubt, and a possible reasoning of Hubris, or maximising Management

utility.

The third group, concerning payment method, found that for the cash payment

method, this hypothesis was supported. However for the equity payment method, this

hypothesis was not supported. Negative results were found for this group, with one

positive observation for the equity payment method in a year of high activity. Overall,

the results were inconclusive, however the negative return for cash payment method



for combined years did achieve a 5% level of significance. This again suggests the

market is slow to react, and that Hubris may be a possible motivation.

The fourth group concerned small firm size paired with either cash or equity payment

method. For both sets of combinations, it was found that this hypothesis was not

supported. Overall for the combined years and 1992, the returns were negative, and

for the year 2000 the returns were positive. This suggests that overall the EMH is not

supported, but for years of high activity, the market is more efficient. Perhaps

Disciplinary Theory could best explain the positive results.

The fifth group, which paired large firm size with either cash or equity payment

method, provided mixed results. Te cash pairing observed that the hypothesis was

supported, but the equity paring again did not. The EMH was also not supported. The

returns were also negative, suggesting that the wealth of the shareholder was again not

the motivation.

Overall it was found that three of the groups did not support this hypothesis. Two of

the groups provided mixed results, were in both cases the cash payment method

variable supported the hypothesis, but the equity variable did not support the

hypothesis. There was no clear support for this hypothesis. It is my conlusion that

overall, this hypothesis was not supported.

The EMH was also not supported for all of the groups as returns appeared to be

largely negative throughout. However, the periods of higher activity supported the

EMH more than the periods of low activity, which was unexpected.

Hubris was considered to be the most relevant motivation for the groups.

Hypothesis H2:

This Hypothesis stated that smaller sized firms should generate more positive or less

negative returns than large sized firms, as smaller sized firms are more in touch with

the needs of the shareholder.



This hypothesis was found to be supported by the observations in the second group,

for all of the sub years, particularly in the year 2000 where the small firms produced a

loss of -0.38% compared to the large firms� -3.17%. The negative returns suggest that

the EMH is not supported by these results, and that overall, Hubris or Maximising

Management Utility may best explain the motivation.

Hypothesis H3:

This hypothesis stated that the cash payment method should generate less negative

returns than the equity payment method, as the cash payment method signals

confidence to the market.

When examining the third group, concerned with payment method, it was fund that

this hypothesis was supported by the combined years and by the year of low activity,

1992. However, the year of high activity did not support this hypothesis. The negative

return of all years combined in the cash payment method results showed a 5% level of

significance. Altogether, this hypothesis was mostly supported.

The negative returns experienced suggested that the EMH is also not supported by

this sub group, and that again, possibly Hubris could best explain the theory behind

motivation for the mergers.

Hypothesis H4:

This hypothesis stated that a combination of small firm size and low merger activity

should produce smaller losses than a large firm size in a period of high merger

activity.

This hypothesis was not supported by the results, although the difference in returns

was less than 0.4%. As hypothesis H1 was not supported, these results are not entirely

surprising. The negative results also suggest Hubris and do not support EMH.

Hypothesis H5:

This hypothesis stated that a combination of cash payment method in a period of low

merger activity should produce less negative results than a combination of equity

payment method in a period of high merger activity.



This hypothesis was also not supported, as the period of high activity with cash

produced a small gain, compared to the period of low activity with equity which

produced a small loss.

Theses sub groups supported EMH, as the gains and losses were so small. A

motivation for the mergers may fall in the category of Hubris, as they appear to be

more of a judgement of error.

Hypothesis H6:

This hypothesis theorised that a combination of small firm size with cash would

generate smaller losses than a combination of small firm size with equity as payment

method.

This hypothesis was supported for the combined years, 1992, and for the year 2000.

Negative results were generated for all but one year, namely the small size with cash

combination in the year 2000, which produced a small positive gain. All together,

EMH was not supported by this sub group, and Hubris may best explain some of the

results.

Hypothesis H7:

Within this hypothesis, it was predicted that the combination of large firm size with

cash should produce smaller losses than a combination of large firm size equity as the

payment method.

This hypothesis was supported for the combined years, and for the year 1992, but not

for the year 2000. Overall, this hypothesis was not supported. Negative observations

also do not support EMH, and mat suggest Hubris yet again as the motivation.

Hypothesis H8:

This hypothesis stated that the combination of small firm size with cash payment

method in a period of low merger activity should produce less negative results than a

combination of large firm size with equity payment method in a period of high merger

activity.



This hypothesis was not supported by the observations. The results were negative, and

insignificant. The results also do not support EMH, and suggest Hubris as an

explanation.

In Conclusion:

In total, just three of the Hypotheses were supported, namely H2, H3 and H6. The

hypotheses of H1, H4, H5, H7 and H8 were not supported by the results. The small

sample size may have corrupted the results, as for some sub-groups there were as few

as 3 companies from 1992, and a dozen or so from the year 2000. Thin Trading may

have caused some of the large deviations from the mean, explaining some of the large

drops, or large gains in share price on some of the event days, as no control was used

for thin trading. More often than not, negative results were found. The Efficient

Market Hypothesis was not supported, and it was found that Hubris Hypothesis best

supports the reasons behind the merger.

Referencing & Bibliography _____________________________________________________________________


Referencing & Bibliography

Arnold, G. (2004) Corporate Financial Management, 3rd Ed, London, pitman publishing Agrawal. A, Jaffe. J.F, Mandelker. G.N (1992): � The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly�. The Journal of Finance, Vol. 52, No. 4. Barnes. P (1978): �The Effect of a Merger on the Share Price of the Attacker�. Accounting and Business Research, Summer 1978. Binder. J.J (1985): �On the Use of the Multivariate Regression Model in Event Studies�. Journal of Accounting Research, Vol. 23, No. 1. Blackburn. K, Ravn. M.O (1992): �Business Cycles in the United Kingdom: Facts and Fictions�. Economica, Vol.59, No.236. Chan. K.C (1985): �An Exploratory Investigation of the Firm Size Effect�. Journal of Financial Economics, Vol. 14, pp. 451-471. Crook. J (1995): �Time Series Explanations of Merger Activity: Some Econometric Results�. Journal of Financial Economics, pp.59-83. Dimson. E, Marsh. P (1986): �Event Study Methodologies and the Size Effect: The Case of UK Press Recommendations�. Journal of Financial Economics, Vol. 17, pp. 113-142. Dodds. J.C, Quek. J.P (1985): �Effect of Mergers on the Share Price Movement of the Acquiring Firms: A UK Study�. Journal of Business Finance and Accounting, Vol. 12, No. 2. Dyckman. T, Philbrick. D, Stephan. J (1984): �A Comparison of Event Study Methodologies Using Daily Stock Returns: A Simulation Approach�. Journal of Accounting Research, Vol. 22, pp1-30. Franks. J, Harris. R, Titman. S (1991): �The Postmerger Share-Price Performance of Acquiring Firms�. Journal of Financial Economics, Vol. 29, pp. 81-96.



Golbe. D.L, White. L.J (1993): �Catch a Wave: The Time Series Behaviour of Mergers�. The Review of Economics and Statistics, pp. 493-499. Gregory. A (1997): �An Examination of the Long Run Performance of UK Acquiring Firms�. Journal of Business Finance and Accounting, Vol. 24, No. 7. Harford. J (2003): �What Drives Merger Waves?� Journal of Financial Economics, pp. 2-32. Higson. C, Elliott. J (1998): �Post-takeover Returns: The UK Evidence�. Journal of Empirical Finance, Vol. 5, pp. 27-46. Higson. C, Elliott. J (1998): �Post-takeover Returns: The UK Evidence�. Journal of Empirical Finance, Vol. 5, pp. 27-46. Jegadeesh. N, Titman. S (1993): �Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency�. The Journal of Finance, Vol. 48, No. 1. Kennedy. V.A, Limmack. R.J (1996): �Takeover Activity, CEO Turnover, and the Market for Corporate Control�. Journal of Business Finance and Accounting, Vol. 23, No. 2. Limmack. R.J (1993): �Bidder Companies and Defended Bids: A Test of Roll�s Hubris�. Managerial Finance, Vol. 19, No. 1. Limmack. R.J (1991): �Corporate Mergers and Shareholder Wealth Effects: 1977-1986�. Accounting and Business Research, Vol. 21, No. 83, pp.239-251. Limmack. R (2003): �Discussion of Glamour Acquirers, Method of Payment and Post-acquisition Performance: The UK Evidence�. Journal of Business Finance and Accounting, Vol. 30, No. 1. Martin. K.J (1996): �The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership�. The Journal of Finance, Vol. 51, No. 4. Mitchell. M, Stafford. E (2000): �Mangerial Decisions and Long-Term Stock Price Performance�. Journal of Business, Vol. 73, No. 3. Moeller. S.B, Schlingemann. F.P, Stulz. R.M (2003): �Firm Size and the Gains from Acquisitions�. Journal of Financial Economics, Vol. 73, pp.201-228. Moeller. S.B, Schlingingemann. F.P, Stulz. R.M (2005): �Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave�. The Journal of Finance, Vol 60, No. 2. Parkinson. C, Dobbins. R (1993): �Returns to Shareholders in Successfully Defended Takeover Bids: UK Evidence 1975-1984�. Journal of Business Finance and Accounting, Vol. 20, No. 4.



Resende. M (1999): �Wave Behaviour of Mergers and Acquisitions in the UK: A Sectoral Study�. Oxford Bulletin of Economics and Statistics, Vol 61, No. 1. Rhodes-Kropf. M, Robinson. D.T, Viswanathan. S (2005): �Valuation Waves and Merger Activity: The Empirical Evidence�. Article in Progress. Roll. R (1986): �The Hubris Hypothesis of Corporate Takeovers�. Journal of Business, Vol. 59, No. 2. Strong. N (1992): �Modelling Abnormal Returns: A Review Article�. Journal of Business Finance and Accounting. Subhash. C, Mathur. I, Mathur. S (1989): �Do Stock Market Prices Affect Mergers?� Managerial Finance, Vol. 15, No. 4. Sudarsanam. S, Holl. P, Salami, A (1996): �Shareholder Wealth Gains in Mergers: Effect of Synergy and Ownership Structure�. Journal of Business Finance and Accounting, Vol. 23, No. 5. Sudarsanam. S, Mahate. A.A (2003): �Glamour Aquirers, Method of Payment and Post-acquisition Performance: The UK Evidence�. Journal of Business Finance and Accounting, Vol. 30, No. 1. Town. R.J (1992): �Merger Waves and the Structure of Merger and Acquisition Time-Series�. Journal of Applied Economics, Vol. 7, supplement, pp. S83-S100. Travlos. N.G (1987): �Corporate Takeover Bids, Methods of Payment, and Bidding Firms� Stock Returns�. The Journal of Finance, Vol. 42, No. 4.

Appendix I _____________________________________________________________________


Appendix I:

Sample Company Information

EVENT CODE BIDDER

MARKET VALUE BIDDER

£Millions Year Firm Size

Payment Method

1001 Bromsgrove Industries PLC 50.07 1992 S E 1002 United Energy PLC 1 1992 S C 1003 BM Group PLC 310.98 1992 S E 1004 West Trust PLC 2.46 1992 S E 1005 Flextech Communications 52.01 1992 S C 1006 Bowater PLC 1171.54 1992 L E 1007 Welpac PLC 12.2 1992 S E 1008 Raine Industries PLC 137.22 1992 S E 1009 Intercare Group PLC 28.65 1992 S E 1010 JLI Group PLC 31.79 1992 S E 1011 J Bibby & Sons PLC 222.92 1992 S C 1012 Lamont Holdings PLC 79.43 1992 S E 1013 Ivory & Sime PLC 40.92 1992 S C 1014 Young Group PLC 2 1992 S C 1015 Medeva PLC 425.83 1992 S C 1016 Smiths Industries PLC 837.06 1992 L C 1017 British Airways PLC 1953.72 1992 L C 1018 Novo Group PLC 2.59 1992 S E 1019 Worthington Group PLC 3.71 1992 S E 1020 Guinness PLC 10094.95 1992 L C 1021 Wagon Industrial Holdings PLC 133.11 1992 S E 1022 ACT Group PLC 195.47 1992 S E 1023 Carclo Engineering Group PLC 59.36 1992 S C 1024 Tomkins PLC 1279.39 1992 L E 1025 Wassall PLC 214.84 1992 S E 1026 Frogmore Estates PLC 111.67 1992 S C 1027 Sedgwick Group PLC 564.66 1992 S E 1028 TT Group PLC 127.82 1992 S E 1029 SelecTV PLC 22.46 1992 S C 2001 Sage Group PLC 8753.5 2000 L E 2002 Johnson Service Group PLC 147.58 2000 S C 2003 NSB Retail Systems PLC 587.56 2000 S E 2004 Airtours PLC 1341.28 2000 L C 2005 Gyrus Group PLC 103.35 2000 S E 2006 PowerGen PLC 2725.51 2000 L C 2007 Bass PLC 87.33 2000 S C 2008 Talisman House PLC 214.71 2000 S E 2009 First Technology PLC 349.67 2000 S C 2010 BP Amoco PLC 104552.13 2000 L C 2011 Scottish Radio Holdings PLC 544.21 2000 S C 2012 Hogg Robinson PLC 147.26 2000 S C 2013 YJL PLC 13.96 2000 S C 2014 BP Amoco PLC 107962.44 2000 L C 2015 Misys PLC 4890.48 2000 L C 2016 Halifax Group PLC 15390.25 2000 L C 2017 HSBC Holdings PLC{HSBC} 59212.99 2000 L E 2018 Rexam PLC 895.27 2000 L C

Appendix I _____________________________________________________________________


2019 CMG PLC 5547.76 2000 L C 2020 Capital Radio PLC 994.48 2000 L C 2021 Haslemere Estates PLC(Rodamco) 187.72 2000 S C 2022 Ennstone PLC 28.98 2000 S E 2023 Unilever PLC 11216.39 2000 L E 2024 Allied Leisure PLC 68.9 2000 S C 2025 British Land Co PLC 2201.52 2000 L E 2026 SFI Group PLC 118.09 2000 S C 2027 Homestyle Group PLC 147.76 2000 S C 2028 National Express Group PLC 887.88 2000 L C 2029 Anglo American PLC 13392.16 2000 L C 2030 Pearson PLC 11415.37 2000 L C 2031 Jourdan PLC 18.24 2000 S C 2032 Guinness Peat Group PLC 171.24 2000 S C 2033 Billiton PLC 6414.09 2000 L C 2034 Camellia PLC 77.22 2000 S C 2035 Macfarlane Group PLC 78 2000 S C 2036 SmithKline Beecham PLC 52357.74 2000 L C 2037 Upton & Southern Holdings PLC 8.93 2000 S E 2038 London Bridge Software Holding 972.24 2000 L E 2039 Kleeneze PLC 88.14 2000 S C 2040 Vodafone Group PLC 157910.75 2000 L E 2041 Pillar Property PLC 509.52 2000 S C 2042 Belgo Group PLC 33.34 2000 S C 2043 Crown Sports PLC 22.8 2000 S E 2044 Wyko Investments Ltd 89.33 2000 S C 2045 Bodycote International PLC 580.18 2000 S C

Appendix II _____________________________________________________________________


Appendix II:

Daily Average Abnormal Returns -40 to +40 Days

All Companies

Event All 1992 2000 Day Years -40 -0.002691922 -0.009165768 0.001480112 -39 -0.001112254 -0.00715457 0.002781683 -38 -0.000197493 0.000699163 -0.000775338 -37 -7.58747E-05 -0.00350593 0.002134606 -36 0.004562682 -0.004797965 0.010595098 -35 0.001319354 -0.001687789 0.00325729 -34 -0.000652448 -0.000450218 -0.000782774 -33 0.002145234 0.000454454 0.003234848 -32 -0.005252461 0.000918325 -0.00922919 -31 0.001048285 -0.000239532 0.001878212 -30 0.003207389 0.001875041 0.004066013 -29 0.000993689 -0.004530737 0.004553875 -28 0.000536673 -0.00304164 0.002842696 -27 -0.012112601 -0.020657484 -0.006605899 -26 0.000682804 0.00848984 -0.004348397 -25 0.007495131 0.016345159 0.00179178 -24 0.004257916 0.002990494 0.005074699 -23 0.001729161 -0.003504371 0.005101882 -22 0.005301879 0.015010339 -0.000954684 -21 -0.004305937 0.003575856 -0.009385315 -20 -0.007852793 -0.000596399 -0.012529136 -19 -0.001534436 1.08207E-05 -0.002530269 -18 -0.005275704 -0.001491521 -0.0077144 -17 -0.005609666 -0.00755343 -0.004357018 -16 -0.001653203 -0.002916554 -0.000839043 -15 -0.002258438 -0.004376978 -0.000893157 -14 -0.000821702 0.000460855 -0.001648239 -13 -0.003265679 -0.004594045 -0.002409621 -12 -0.002400292 -0.005397847 -0.000468534 -11 -0.000721237 -0.003029888 0.00076656 -10 0.001720304 -0.001518723 0.003807677 -9 -0.002498798 0.003580881 -0.006416814 -8 0.006771414 0.004879587 0.007990591 -7 -0.000370254 0.001325065 -0.001462793 -6 -0.00014029 0.00039976 -0.000488322 -5 -0.000822222 -0.005240735 0.002025265 -4 0.001698414 -0.000195583 0.002918989 -3 -0.000735271 -0.003293884 0.000913612 -2 -0.001535472 -0.005517736 0.001030876 -1 -0.003639076 -0.002950431 -0.004082869 0 -0.014315927 -0.024657400 -0.007651421 1 -0.003324136 -0.008097276 -0.000248112 2 -0.001312508 -0.000469436 -0.001855822 3 0.004497979 -0.003014492 0.00933935

Appendix II _____________________________________________________________________


4 0.003364072 0.003376938 0.003355781 5 0.000831014 0.000122417 0.001287666 6 0.001364133 0.002236491 0.000801946 7 0.002210374 0.00177404 0.002491568 8 -0.004427707 0.002657444 -0.008993693 9 0.000647326 -0.002118106 0.002429493

10 -0.001974763 -0.003471638 -0.00101011 11 -0.00508549 -0.003502733 -0.006105489 12 -0.006236216 -0.00095205 -0.009641568 13 -0.001958124 -0.002563473 -0.001568011 14 -0.001701741 -0.002073896 -0.001461908 15 9.85425E-05 0.001119205 -0.000559218 16 -0.001936044 -0.000708357 -0.00272722 17 -0.00458317 -0.005384236 -0.004066927 18 0.001467852 0.009548427 -0.003739629 19 -0.000996994 0.001230856 -0.00243272 20 -0.001032843 -0.001117785 -0.000978103 21 -0.00710421 -0.006285021 -0.007632132 22 -0.005253117 -0.001508244 -0.007666479 23 -0.004911407 -0.002062128 -0.006747609 24 -0.00061977 0.002891948 -0.002882878 25 0.000954218 0.005288029 -0.001838683 26 -0.001494801 0.001162855 -0.003207512 27 -0.000896564 -0.002585933 0.00019214 28 -0.000318082 -0.003621299 0.001810657 29 -0.001680076 -0.000970291 -0.002137492 30 0.003459448 0.001529278 0.004703335 31 -0.002905974 -0.006839728 -0.000370888 32 -0.002104541 0.001811757 -0.004628378 33 0.001914215 0.003297554 0.00102273 34 -0.001573119 0.000667613 -0.003017147 35 0.004075228 -0.000279027 0.006881304 36 -0.003660309 -0.000116524 -0.005944081 37 -0.004634621 -0.00044482 -0.007334715 38 -0.002259507 -0.002848467 -0.001879956 39 0.000920469 0.000994357 0.000872853 40 -0.008087674 -0.004175967 -0.010608552

Appendix III _____________________________________________________________________


Appendix III:


Companies By Firm Size

Small Size Large Size Event All 1992 2000 All 1992 2000 Day Years Years -40 -0.008 -0.01031 -0.00577 0.007704 -0.00367 0.010548 -39 -0.00092 -0.00641 0.004356 -0.0015 -0.01074 0.000814 -38 -0.0031 -0.00119 -0.00493 0.005494 0.009785 0.004421 -37 0.004314 -0.00262 0.010975 -0.00868 -0.00774 -0.00892 -36 8.24E-05 -0.00616 0.006076 0.013344 0.001742 0.016244 -35 0.002555 -0.00256 0.007469 -0.0011 0.002514 -0.00201 -34 -0.00139 -0.00244 -0.00037 0.000786 0.009106 -0.00129 -33 0.000361 0.000815 -7.6E-05 0.005643 -0.00128 0.007373 -32 -0.00357 0.000905 -0.00787 -0.00855 0.000981 -0.01093 -31 0.0004 -0.00128 0.002008 0.002319 0.004733 0.001716 -30 0.002118 -0.0008 0.004922 0.005343 0.014735 0.002996 -29 0.001178 0.000341 0.001982 0.000632 -0.02792 0.007769 -28 -0.00253 -0.00426 -0.00088 0.006552 0.0028 0.00749 -27 -0.01321 -0.02423 -0.00264 -0.00996 -0.00353 -0.01156 -26 0.002287 0.013423 -0.0084 -0.00246 -0.01519 0.00072 -25 0.006026 0.018608 -0.00605 0.010374 0.005483 0.011596 -24 0.00536 0.002033 0.008554 0.002097 0.007586 0.000725 -23 -0.00104 -0.00476 0.002528 0.007156 0.0025 0.00832 -22 0.009606 0.019947 -0.00032 -0.00314 -0.00869 -0.00175 -21 -0.00212 0.001457 -0.00556 -0.00858 0.013748 -0.01416 -20 -0.00644 -0.00106 -0.01161 -0.01063 0.001608 -0.01368 -19 -0.00238 0.000304 -0.00495 0.000114 -0.0014 0.000492 -18 -0.00583 -0.003 -0.00855 -0.00419 0.005729 -0.00667 -17 -0.00547 -0.0067 -0.00428 -0.00589 -0.01165 -0.00445 -16 -0.00294 -0.0036 -0.0023 0.000867 0.000374 0.00099 -15 -0.00521 -0.00487 -0.00554 0.003531 -0.00199 0.004912 -14 -0.00174 0.00019 -0.0036 0.000986 0.001763 0.000792 -13 -0.00388 -0.00574 -0.00208 -0.00207 0.000924 -0.00282 -12 -0.00414 -0.00589 -0.00245 0.001 -0.00302 0.002005 -11 -0.00457 -0.00516 -0.00401 0.006824 0.007182 0.006735 -10 -0.00129 -0.00105 -0.00152 0.007618 -0.00378 0.010467 -9 0.000334 0.005508 -0.00463 -0.00805 -0.00567 -0.00865 -8 0.003818 0.005502 0.002202 0.01256 0.001894 0.015226 -7 -0.0001 -2.9E-05 -0.00017 -0.00089 0.007826 -0.00307 -6 0.001818 -0.00045 0.003992 -0.00398 0.004458 -0.00609 -5 -0.00349 -0.00518 -0.00187 0.004402 -0.00555 0.006889 -4 -5.7E-05 0.00029 -0.00039 0.005138 -0.00253 0.007055 -3 0.001337 -0.00225 0.004779 -0.0048 -0.00831 -0.00392 -2 -0.00217 -0.00733 0.002788 -0.0003 0.003171 -0.00117 -1 -0.00215 -0.00329 -0.00105 -0.00656 -0.00131 -0.00788 0 -0.00653 -0.02253 0.008828 -0.02958 -0.03488 -0.02825 1 -0.00655 -0.00927 -0.00395 0.003007 -0.00249 0.00438

Appendix III _____________________________________________________________________


2 -0.00086 -0.00329 0.00147 -0.0022 0.013062 -0.00601 3 0.006494 -0.00334 0.015935 0.000587 -0.00145 0.001095 4 0.004646 0.002169 0.007025 0.000851 0.009176 -0.00123 5 0.001032 0.000485 0.001557 0.000438 -0.00162 0.000951 6 0.002837 0.002505 0.003155 -0.00152 0.000948 -0.00214 7 0.001132 0.004941 -0.00252 0.004324 -0.01343 0.008762 8 -0.00761 0.004422 -0.01915 0.001801 -0.00581 0.003704 9 -0.00085 -0.00231 0.00054 0.003589 -0.00122 0.004791

10 -0.00205 -0.0049 0.000698 -0.00183 0.003408 -0.00315 11 -0.00142 -0.00416 0.001205 -0.01227 -0.00036 -0.01524 12 -0.00855 -0.00173 -0.01511 -0.00169 0.002784 -0.00281 13 -0.00481 -0.0017 -0.0078 0.003631 -0.00671 0.006216 14 -0.00494 -0.00333 -0.00649 0.004654 0.003973 0.004824 15 -0.00044 0.002603 -0.00336 0.001148 -0.006 0.002936 16 -0.0044 -0.00091 -0.00774 0.002887 0.000259 0.003545 17 -0.00344 -0.00641 -0.00059 -0.00682 -0.00045 -0.00841 18 0.003963 0.010799 -0.0026 -0.00342 0.003548 -0.00517 19 -0.00056 0.00134 -0.00239 -0.00185 0.000706 -0.00248 20 -0.00195 -0.00213 -0.00178 0.00077 0.003763 2.15E-05 21 -0.01193 -0.00599 -0.01763 0.002354 -0.00768 0.004863 22 -0.00298 0.001285 -0.00707 -0.00971 -0.01491 -0.00841 23 -0.00527 -0.0017 -0.00869 -0.00422 -0.00382 -0.00432 24 -0.00091 0.003207 -0.00487 -4.2E-05 0.00138 -0.0004 25 0.003047 0.005899 0.000309 -0.00315 0.002357 -0.00452 26 -6E-05 0.004324 -0.00427 -0.00431 -0.01401 -0.00188 27 -0.00262 -0.00142 -0.00378 0.002489 -0.00816 0.005152 28 0.002732 -0.00549 0.010627 -0.0063 0.005357 -0.00921 29 -0.00033 -0.00237 0.001637 -0.00433 0.005765 -0.00686 30 -0.00229 -0.00221 -0.00236 0.014723 0.019489 0.013531 31 -0.0079 -0.00887 -0.00698 0.006889 0.002903 0.007885 32 -0.00334 0.000572 -0.00709 0.000314 0.007763 -0.00155 33 0.001409 0.004084 -0.00116 0.002904 -0.00048 0.00375 34 -0.00062 0.000109 -0.00132 -0.00344 0.003348 -0.00514 35 0.001789 -0.001 0.004467 0.008557 0.003188 0.009899 36 -0.00883 -0.00186 -0.01552 0.006477 0.008268 0.006029 37 -0.00304 -0.00225 -0.0038 -0.00776 0.008228 -0.01175 38 -0.00455 -0.00286 -0.00617 0.002224 -0.00281 0.003482 39 0.002084 0.001314 0.002823 -0.00136 -0.00054 -0.00156 40 -0.00601 -0.00582 -0.0062 -0.01215 0.00373 -0.01613

Appendix IV _____________________________________________________________________


Appendix IV:


Companies By Payment Method

Cash Payment Equity Payment Event All 1992 2000 All 1992 2000 Day Years Years

-40 0.002193 -0.00743 0.005693 -0.01027 -0.01039 -0.0101 -39 0.001759 -0.00117 0.002825 -0.00557 -0.01138 0.002663 -38 0.001098 0.001642 0.0009 -0.00221 3.37E-05 -0.00538 -37 -0.00018 -0.00865 0.002906 7.93E-05 0.000127 1.22E-05 -36 0.00103 -0.01464 0.006727 0.010045 0.002148 0.021231 -35 0.000593 -0.00466 0.002501 0.002447 0.000407 0.005337 -34 -0.00171 0.000142 -0.00239 0.00099 -0.00087 0.003623 -33 -0.00105 0.000537 -0.00163 0.007103 0.000396 0.016603 -32 -0.00185 0.003339 -0.00373 -0.01054 -0.00079 -0.02435 -31 0.000287 -0.0028 0.00141 0.00223 0.00157 0.003165 -30 -0.0008 0.002584 -0.00204 0.009432 0.001374 0.020848 -29 0.000122 -0.00596 0.002335 0.002346 -0.00352 0.010657 -28 -0.00284 0.00263 -0.00483 0.005774 -0.00704 0.023933 -27 -0.02055 -0.04942 -0.01005 0.000981 -0.00036 0.002877 -26 0.008954 0.031149 0.000884 -0.01215 -0.0075 -0.01874 -25 0.009606 0.036073 -1.8E-05 0.00422 0.00242 0.006769 -24 0.002977 0.009244 0.000699 0.006245 -0.00142 0.017108 -23 -0.00075 -0.01635 0.004918 0.005582 0.005565 0.005608 -22 0.010517 0.037284 0.000783 -0.00279 -0.00071 -0.00573 -21 -0.00475 0.004438 -0.0081 -0.00361 0.002967 -0.01293 -20 -0.00751 -0.00337 -0.00901 -0.00839 0.00136 -0.0222 -19 -0.00214 -0.00058 -0.00271 -0.0006 0.000424 -0.00205 -18 -0.00594 0.000305 -0.00821 -0.00424 -0.00276 -0.00634 -17 -0.00417 -0.00842 -0.00263 -0.00784 -0.00694 -0.00911 -16 -0.00464 -0.00523 -0.00443 0.002984 -0.00128 0.00903 -15 -0.0065 -0.01049 -0.00505 0.00432 -6.3E-05 0.010529 -14 0.004839 0.008324 0.003571 -0.0096 -0.00509 -0.016 -13 -0.00355 -0.00951 -0.00139 -0.00282 -0.00113 -0.00522 -12 -0.00169 -0.00508 -0.00046 -0.0035 -0.00562 -0.0005 -11 -0.00104 -0.00467 0.000283 -0.00023 -0.00187 0.002096 -10 0.002841 -0.00787 0.006737 -1.9E-05 0.002965 -0.00425 -9 0.000314 0.008367 -0.00261 -0.00686 0.000202 -0.01687 -8 0.006386 0.012516 0.004157 0.007369 -0.00051 0.018533 -7 4.33E-05 -0.00236 0.000916 -0.00101 0.003924 -0.00801 -6 0.002041 0.001406 0.002272 -0.00352 -0.00031 -0.00808 -5 0.001402 -0.00449 0.003544 -0.00427 -0.00577 -0.00215 -4 0.007846 0.003337 0.009486 -0.00784 -0.00269 -0.01514 -3 -0.00089 -0.0006 -0.001 -0.00049 -0.0052 0.006178 -2 -0.00146 0.00041 -0.00214 -0.00165 -0.0097 0.009748 -1 -0.00399 -0.00318 -0.00429 -0.00309 -0.00279 -0.00353 0 -0.0064 0.012052 -0.01311 -0.0266 -0.05057 0.007347 1 -0.00402 -0.01747 0.000877 -0.00225 -0.00148 -0.00334

Appendix IV _____________________________________________________________________


2 -0.00373 0.001535 -0.00565 0.002443 -0.00188 0.008574 3 0.0072 -0.01005 0.013474 0.000305 0.001955 -0.00203 4 0.005487 0.003187 0.006323 7E-05 0.003511 -0.00481 5 0.000496 -0.00197 0.001392 0.00135 0.001598 0.001 6 0.000129 0.002255 -0.00064 0.00328 0.002223 0.004778 7 0.000139 -0.00487 0.001961 0.005425 0.006464 0.003952 8 0.005592 0.00532 0.00569 -0.01997 0.000778 -0.04937 9 0.002498 -0.00106 0.003791 -0.00222 -0.00287 -0.00132

10 -0.00227 -0.00625 -0.00082 -0.00152 -0.00151 -0.00153 11 -0.00497 -0.00498 -0.00496 -0.00527 -0.00246 -0.00925 12 -0.01043 -0.01147 -0.01006 0.000276 0.00647 -0.0085 13 -0.0033 -0.00945 -0.00107 0.00013 0.002299 -0.00294 14 -0.00139 0.000959 -0.00225 -0.00218 -0.00421 0.0007 15 0.001673 0.006195 2.8E-05 -0.00234 -0.00246 -0.00217 16 -0.00086 -0.00394 0.000263 -0.00361 0.001571 -0.01095 17 -0.00857 -0.0184 -0.00499 0.001598 0.003801 -0.00152 18 0.001783 0.021267 -0.0053 0.000979 0.001276 0.000557 19 -6.6E-05 0.006063 -0.00229 -0.00244 -0.00218 -0.00281 20 -0.00086 0.001405 -0.00168 -0.00131 -0.0029 0.000952 21 0.002012 -0.01232 0.007222 -0.02125 -0.00203 -0.04848 22 -0.00487 -0.00536 -0.0047 -0.00584 0.00121 -0.01583 23 -0.00019 -0.00062 -3E-05 -0.01224 -0.00308 -0.02522 24 0.000993 -0.00385 0.002755 -0.00312 0.007652 -0.01839 25 -0.00071 0.004453 -0.00258 0.003533 0.005877 0.000212 26 0.000497 -0.00178 0.001324 -0.00458 0.003239 -0.01567 27 0.001561 -0.00697 0.004663 -0.00471 0.000508 -0.0121 28 -0.00277 -0.0082 -0.0008 0.00349 -0.00039 0.008989 29 -0.00363 -0.00943 -0.00152 0.001344 0.005001 -0.00384 30 0.002573 0.003597 0.002201 0.004834 6.94E-05 0.011585 31 0.001835 -0.0045 0.00414 -0.01026 -0.00849 -0.01277 32 -0.00283 0.001156 -0.00428 -0.00098 0.002275 -0.00558 33 0.003261 0.004993 0.00263 -0.00017 0.0021 -0.0034 34 0.002586 0.009206 0.000179 -0.00803 -0.00536 -0.01181 35 0.001307 -0.00267 0.002755 0.00837 0.001411 0.018229 36 -0.00036 6.24E-05 -0.00052 -0.00878 -0.00024 -0.02086 37 -0.00736 -0.00244 -0.00915 -0.0004 0.000965 -0.00234 38 0.000508 0.002984 -0.00039 -0.00655 -0.00697 -0.00597 39 0.002818 0.001439 0.00332 -0.00202 0.000681 -0.00586 40 -0.00513 0.001071 -0.00739 -0.01267 -0.00788 -0.01947

Appendix V _____________________________________________________________________


Appendix V:


Small Companies with Payment Method

Small & Cash Small & Equity Event All 1992 2000 All 1992 2000 Day Years Years

-40 -0.00429 -0.00496 -0.00397 -0.01294 -0.01352 -0.0115 -39 0.001208 -9.3E-05 0.001824 -0.00375 -0.01019 0.012373 -38 0.001429 0.001662 0.001319 -0.00914 -0.00291 -0.02473 -37 0.005318 -0.01175 0.013403 0.002977 0.002854 0.003285 -36 -0.00352 -0.01525 0.002039 0.004882 -0.00071 0.018858 -35 0.002707 -0.00402 0.005892 0.002352 -0.00169 0.012462 -34 -0.00224 -0.00224 -0.00224 -0.00025 -0.00256 0.005539 -33 -0.0021 0.001603 -0.00386 0.003642 0.000343 0.011891 -32 -0.0011 0.003728 -0.00339 -0.00686 -0.00079 -0.02206 -31 -0.00383 -0.00312 -0.00417 0.006042 -0.00017 0.021573 -30 -0.00193 0.003262 -0.00439 0.007511 -0.00324 0.034398 -29 0.000423 -0.00044 0.00083 0.002185 0.000808 0.005629 -28 -0.00443 0.001114 -0.00705 -8.6E-06 -0.00748 0.018676 -27 -0.02456 -0.06645 -0.00472 0.001919 0.001105 0.003953 -26 0.01274 0.044055 -0.00209 -0.01165 -0.00496 -0.02838 -25 0.011772 0.046199 -0.00454 -0.00163 0.002053 -0.01086 -24 0.002523 0.007064 0.000372 0.009143 -0.00099 0.034466 -23 -0.00549 -0.01955 0.001175 0.00489 0.004122 0.00681 -22 0.01749 0.053785 0.000297 -0.0009 -0.00036 -0.00228 -21 0.001108 0.003859 -0.00019 -0.00644 1.51E-05 -0.02256 -20 -0.00541 -0.0035 -0.00631 -0.00781 0.000409 -0.02836 -19 -0.00446 -0.00143 -0.0059 0.000407 0.001346 -0.00194 -18 -0.00386 -0.0013 -0.00507 -0.00846 -0.00401 -0.01958 -17 -0.00585 -0.00748 -0.00508 -0.00496 -0.00623 -0.00176 -16 -0.00174 -0.00316 -0.00107 -0.00453 -0.00387 -0.00619 -15 -0.00558 -0.01234 -0.00238 -0.00472 -0.00039 -0.01553 -14 0.005776 0.008078 0.004686 -0.01177 -0.00454 -0.02984 -13 -0.00571 -0.01294 -0.00229 -0.00143 -0.00143 -0.00143 -12 -0.00265 -0.00696 -0.00061 -0.00611 -0.00525 -0.00826 -11 -0.0059 -0.00895 -0.00446 -0.00279 -0.00288 -0.00258 -10 -0.00236 -0.00988 0.001204 0.00014 0.004254 -0.01015 -9 0.003412 0.011777 -0.00055 -0.00377 0.001746 -0.01756 -8 0.001583 0.014598 -0.00458 0.006799 4.37E-05 0.023686 -7 -0.00105 -0.00511 0.000876 0.001156 0.00302 -0.0035 -6 0.001216 -0.00019 0.001882 0.002621 -0.0006 0.010672 -5 -0.00368 -0.00516 -0.00298 -0.00323 -0.00519 0.001668 -4 0.005073 0.006148 0.004563 -0.0069 -0.00322 -0.01607 -3 -0.00129 0.000826 -0.00229 0.004841 -0.00409 0.027175 -2 0.000107 0.000256 3.62E-05 -0.0052 -0.01188 0.011502 -1 0.000419 -0.00275 0.001922 -0.00557 -0.00362 -0.01045 0 0.007602 0.014434 0.004366 -0.02537 -0.0447 0.022957 1 -0.00873 -0.02168 -0.0026 -0.00365 -0.00182 -0.00823

Appendix V _____________________________________________________________________


2 0.001592 0.000217 0.002243 -0.00413 -0.00539 -0.00098 3 0.009883 -0.01201 0.020254 0.001974 0.001861 0.002257 4 0.006277 0.000269 0.009122 0.002473 0.003309 0.000384 5 0.002248 -0.00113 0.00385 -0.00059 0.001456 -0.00571 6 0.005338 0.00113 0.007332 -0.0005 0.00333 -0.01007 7 -0.00013 0.001258 -0.00078 0.002811 0.007151 -0.00804 8 0.004829 0.004957 0.004768 -0.02418 0.004101 -0.0949 9 0.001487 -5.8E-05 0.002218 -0.00397 -0.00365 -0.00478

10 0.000312 -0.00811 0.004301 -0.00519 -0.00298 -0.01071 11 -0.0021 -0.00737 0.000398 -0.00052 -0.00223 0.00376 12 -0.01377 -0.01511 -0.01313 -0.00161 0.006299 -0.02138 13 -0.00848 -0.01269 -0.00648 7.93E-05 0.004896 -0.01196 14 -0.00448 -0.00271 -0.00532 -0.00556 -0.00371 -0.01019 15 0.000999 0.011672 -0.00406 -0.00235 -0.00284 -0.00113 16 -0.00266 -0.00273 -0.00262 -0.00672 0.00018 -0.02396 17 -0.00829 -0.02322 -0.00123 0.003023 0.003671 0.001404 18 0.007471 0.025533 -0.00108 -0.00071 0.001958 -0.0074 19 0.001133 0.008954 -0.00257 -0.00283 -0.00323 -0.00182 20 -0.00039 0.003613 -0.00229 -0.00403 -0.00558 -0.00015 21 -0.0024 -0.00913 0.000787 -0.02464 -0.00411 -0.07594 22 -0.00386 -0.00079 -0.00532 -0.00179 0.00253 -0.01261 23 0.000124 -0.00156 0.000921 -0.01245 -0.00178 -0.03914 24 0.000349 -0.00526 0.003003 -0.0026 0.008284 -0.02981 25 -0.00053 0.001485 -0.00148 0.007816 0.008547 0.005989 26 0.006277 0.003449 0.007617 -0.00851 0.004848 -0.0419 27 -1.4E-05 -0.00146 0.000672 -0.0061 -0.0014 -0.01786 28 -0.00516 -0.00974 -0.003 0.013259 -0.00294 0.053764 29 -0.004 -0.01188 -0.00027 0.004574 0.003333 0.007676 30 0.00209 -0.00399 0.004968 -0.00812 -0.00115 -0.02556 31 -0.00495 -0.01004 -0.00253 -0.01185 -0.00817 -0.02105 32 -0.00299 0.000654 -0.00471 -0.0038 0.000522 -0.01462 33 0.00278 0.007081 0.000742 -0.00042 0.002287 -0.00718 34 0.00528 0.008646 0.003686 -0.00849 -0.00501 -0.01718 35 -0.00016 -0.00373 0.001539 0.00438 0.000637 0.013738 36 -0.00433 -0.00343 -0.00475 -0.01484 -0.00092 -0.04964 37 -0.00201 -0.00182 -0.00211 -0.00441 -0.00251 -0.00917 38 -0.00119 0.002884 -0.00312 -0.00902 -0.0063 -0.01583 39 0.003343 0.000667 0.004611 0.000405 0.001702 -0.00284 40 -0.00235 0.001177 -0.00402 -0.0109 -0.01002 -0.0131

Appendix VI _____________________________________________________________________


Appendix VI:


Large Companies with Payment Method

Large & Cash Large & Equity Event All 1992 2000 All 1992 2000 Day Years Years

-40 0.015798 -0.01486 0.02014 -0.00455 0.007956 -0.00871 -39 0.12845 -0.0044 0.006006 -0.00439 0.003601 -0.00705 -38 0.29221 0.001581 -0.00231 0.011022 0.002194 0.013965 -37 0.477262 0.000647 -0.0153 -0.00452 -0.00829 -0.00326 -36 0.079398 -0.01281 0.00911 0.014857 -0.01139 0.023605 -35 0.24919 -0.00657 2.5E-05 -0.00255 -0.00485 -0.00179 -34 0.356395 0.007274 -0.00245 0.00286 0.006314 0.001708 -33 0.264488 -0.00266 -0.00063 0.012966 -0.01208 0.021315 -32 0.310891 0.002174 -0.00322 -0.02889 -0.03565 -0.02664 -31 0.103322 -0.00186 0.007824 -0.00884 0.010374 -0.01524 -30 0.18637 0.000552 0.001909 0.004435 -0.00415 0.007298 -29 0.148455 -0.02254 0.007194 0.00938 -0.00954 0.015686 -28 0.258451 0.007175 -0.00055 0.021487 -0.00162 0.02919 -27 0.487667 0.001672 -0.01946 -0.00228 -0.01454 0.0018 -26 0.228986 -0.00757 0.000683 -0.00807 -0.005 -0.00909 -25 0.1162 0.005694 0.007688 0.024638 0.025369 0.024394 -24 0.236182 0.015781 0.001377 0.001363 0.006196 -0.00025 -23 0.078422 -0.00676 0.012331 0.003376 0.000287 0.004405 -22 0.192052 -0.01222 0.002705 -0.00244 0.01779 -0.00919 -21 0.487231 0.006173 -0.01957 -0.00557 -0.01241 -0.00329 -20 0.437766 -0.00298 -0.01336 -0.01205 -0.00011 -0.01603 -19 0.19058 0.001997 0.002605 -0.00212 -0.00202 -0.00215 -18 0.468011 0.005136 -0.01088 0.005939 0.00307 0.006895 -17 0.241296 -0.01125 0.000358 -0.00417 0.032705 -0.01646 -16 0.415191 -0.01144 -0.00537 0.01638 -0.00724 0.024254 -15 0.362039 -0.00493 -0.00403 0.027072 -0.00148 0.03659 -14 0.066001 0.009062 0.003636 -0.00183 -0.00084 -0.00216 -13 0.261083 0.000785 -0.00051 -0.00728 -0.00206 -0.00901 -12 0.260094 0.000562 -0.00059 0.004015 -0.00573 0.007263 -11 0.054008 0.008175 0.004891 0.006509 0.00571 0.006776 -10 0.034801 -0.00183 0.012914 0.004897 0.01463 0.001652 -9 0.420119 -0.00186 -0.0087 -0.0114 0.002975 -0.01619 -8 0.007196 0.00627 0.012119 0.011379 0.005375 0.01338 -7 0.355807 0.005903 -0.00768 -0.00939 -1.2E-05 -0.01251 -6 0.275861 0.006194 -0.0011 -0.02205 -0.00771 -0.02683 -5 0.116447 -0.00246 0.006918 -0.00972 -0.02095 -0.00597 -4 0.023064 -0.0051 0.019862 -0.01257 -0.00767 -0.0142 -3 0.31356 -0.00487 -0.00265 -0.00835 0.011053 -0.01482 -2 0.276142 0.000874 -0.0012 0.004375 -0.00649 0.007995 -1 0.467384 -0.00448 -0.01232 -0.00013 -0.01071 0.003402 0 0.051767 0.004906 -0.03348 -0.01031 -0.01643 -0.00826 1 0.102575 -0.00485 0.006748 0.000855 -0.00121 0.001544

Appendix VI _____________________________________________________________________


2 0.456001 0.005489 -0.01682 0.007438 -0.02463 0.018127 3 0.113156 -0.00419 0.006992 -0.00633 -0.00636 -0.00632 4 0.099675 0.01194 0.007043 -0.0081 -0.00243 -0.00999 5 0.363055 -0.00447 -0.00395 0.005344 -0.00175 0.007707 6 0.195446 0.005631 0.002465 0.015276 0.002226 0.019626 7 0.118725 -0.02326 0.005751 0.016264 0.017224 0.015943 8 0.15407 0.00641 0.004589 -0.0092 -0.02525 -0.00385 9 0.20524 -0.00406 0.002593 0.001187 -0.00169 0.002145

10 0.243021 -0.00068 0.000306 0.001843 -0.01561 0.007661 11 0.383107 0.002197 -0.00806 -0.0185 -0.00718 -0.02227 12 0.446749 -0.00053 -0.01133 -0.00402 -0.02919 0.004375 13 0.145626 0.00027 0.00439 0.002216 -0.00936 0.006075 14 0.06082 0.011955 0.007581 0.009905 0.004859 0.011587 15 0.413367 -0.01024 -0.01145 -0.0018 0.002433 -0.00322 16 0.167618 -0.00757 0.002664 0.00058 -0.00385 0.002057 17 0.365195 -0.00393 -0.00513 -0.0087 -0.02145 -0.00445 18 0.464705 0.00847 -0.01461 -0.00637 -0.05101 0.008511 19 0.422191 -0.00261 -0.00907 -0.0038 -0.00377 -0.0038 20 0.305873 -0.00522 -0.00182 0.0028 0.005029 0.002057 21 0.04442 -0.02189 0.018272 0.004367 0.080519 -0.02102 22 0.34323 -0.01906 -0.00347 -0.01776 -0.0139 -0.01905 23 0.411844 0.002192 -0.00944 -0.01405 -0.02229 -0.0113 24 0.04434 0.000361 0.013379 -0.00321 0.008055 -0.00697 25 0.387972 0.01336 -0.00432 -0.00713 -0.01182 -0.00557 26 0.458898 -0.01746 -0.01182 0.008318 0.001576 0.010566 27 0.011711 -0.02349 0.013572 -0.00103 0.014929 -0.00635 28 0.25762 -0.00357 -0.00038 -0.01797 0.035489 -0.03579 29 0.271032 -0.00207 -0.00063 -0.01505 -0.01416 -0.01535 30 0.289117 0.02635 -0.00149 0.039511 0.011856 0.04873 31 0.028227 0.012119 0.010707 -0.00203 0.005405 -0.0045 32 0.425155 0.002659 -0.00808 0.002745 0.000591 0.003463 33 0.213049 -0.00127 0.00169 -0.00336 -0.01459 0.000384 34 0.368428 0.010883 -0.00604 -0.00371 0.004444 -0.00643 35 0.045006 0.000504 0.00967 0.016828 -0.00085 0.022721 36 0.143854 0.010548 0.00436 0.006342 0.001633 0.007912 37 0.447869 -0.00432 -0.01185 0.00372 0.001387 0.004498 38 0.102069 0.003283 0.004976 0.003174 0.001031 0.003889 39 0.235594 0.003754 0.000684 -0.00019 0.02586 -0.00888 40 0.424208 0.000755 -0.0083 -0.01892 0.001842 -0.02583

Appendix VII _____________________________________________________________________


Appendix VII: Standard Error

Standard Error All Companies

Event Window All Years 1992 2000 -1 to +1 0.00361 0.00655 0.00214 -5 to +5 0.0015 0.00223 0.00131

-10 to +10 0.00091 0.00135 0.00099 -40 to +40 0.00041 0.00062 0.00052 -10 to -1 0.00091 0.00111 0.00129 0 to +1 0.0055 0.00828 0.0037 0 to +5 0.00278 0.00415 0.0023

Standard Error Small Size


-10 to +10 0.00079 0.00137 0.00142 -40 to +40 0.00045 0.0007 0.00068 -10 to -1 0.00069 0.0013 0.00093 0 to +1 0.00001 0.00663 0.00639 0 to +5 0.00224 0.00368 0.00284

Standard Error Large Size


-10 to +10 0.00178 0.00211 0.00196 -40 to +40 0.00074 0.00093 0.00086 -10 to -1 0.00213 0.00163 0.00265 0 to +1 0.01629 0.0162 0.01632 0 to +5 0.00506 0.0069 0.00489

Standard Error Cash Payment


-10 to +10 0.00086 0.00154 0.00123 -40 to +40 0.00051 0.00124 0.00052 -10 to -1 0.00113 0.00192 0.00139 0 to +1 0.00119 0.01476 0.00699 0 to +5 0.00226 0.00425 0.00377

Standard Error Equity Payment


-10 to +10 0.00169 0.00251 0.00294 -40 to +40 0.00073 0.00075 0.00145 -10 to -1 0.00134 0.00131 0.0035 0 to +1 0.01218 0.02455 0.00534 0 to +5 0.00454 0.00859 0.0023

Appendix VII _____________________________________________________________________


Standard Error Small & Cash


-10 to +10 0.0009 0.00186 0.00116 -40 to +40 0.00064 0.00161 0.00053 -10 to -1 0.00083 0.00244 0.00085 0 to +1 0.00817 0.01806 0.00348 0 to +5 0.0027 0.00503 0.0032

Standard Error Small & Equity


-10 to +10 0.00176 0.00231 0.0053 -40 to +40 0.00078 0.00072 0.00241 -10 to -1 0.00149 0.00149 0.00507 0 to +1 0.01086 0.02144 0.01559 0 to +5 0.00425 0.00754 0.00453

Standard Error Large & Cash


-10 to +10 0.00204 0.0016 0.00253 -40 to +40 0.00084 0.00101 0.00105 -10 to -1 0.00276 0.00147 0.00337 0 to +1 0.0157 0.00488 0.02011 0 to +5 0.00545 0.00286 0.00677

Standard Error Large & Equity


-10 to +10 0.00219 0.00257 0.00274 -40 to +40 0.00126 0.00184 0.00164 -10 to -1 0.00319 0.00342 0.004 0 to +1 0.00558 0.00761 0.0049 0 to +5 0.00303 0.00393 0.00446

Appendix VIII _____________________________________________________________________


Appendix VIII:

T - Test

T Test All Companies Event Window All Years 1992 2000

-1 to +1 -1.963 -1.817 -1.869 -5 to +5 -0.925 -2.039 0.488

-10 to +10 -0.627 -1.416 0.299 -40 to +40 -2.83 -1.937 -2.236 -10 to -1 0.049 -0.768 0.484 0 to +1 -1.605 -1.978 -1.067 0 to +5 -0.614 -1.316 0.306

T Test Small Size

Event Window All Years 1992 2000 -1 to +1 -3.466 -2.058 0.33 -5 to +5 -0.61 -2.389 1.859

-10 to +10 -0.619 -1.372 0.593 -40 to +40 -3.548 -1.963 -2.701 -10 to -1 -0.283 -0.637 0.443 0 to +1 -531.391 -2.397 0.382 0 to +5 -0.132 -1.618 1.809

T Test Large Size

Event Window All Years 1992 2000 -1 to +1 -1.142 -1.172 -1.112 -5 to +5 -0.909 -0.805 -0.864

-10 to +10 -0.412 -0.996 -0.199 -40 to +40 -0.404 -0.356 -0.336 -10 to -1 0.242 -0.601 0.335 0 to +1 -0.815 -1.154 -0.732 0 to +5 -0.885 -0.44 -0.991

T Test Cash Payment

Event Window All Years 1992 2000 -1 to +1 -6.02 -0.337 -1.348 -5 to +5 0.121 -0.681 0.364

-10 to +10 1.084 -0.302 1.173 -40 to +40 -1.036 -0.716 -0.767 -10 to -1 1.289 0.392 1.232 0 to +1 -4.375 -0.184 -0.875 0 to +5 -0.071 -0.499 0.147

T Test Equity Payment


-10 to +10 -1.724 -1.168 -0.977 -40 to +40 -2.975 -1.863 -2.22 -10 to -1 -1.598 -1.517 -0.674 0 to +1 -1.185 -1.06 0.375 0 to +5 -0.906 -0.909 0.488

Appendix VIII _____________________________________________________________________


T Test Small & Cash

Event Window All Years 1992 2000 -1 to +1 -0.05 -0.32 0.602 -5 to +5 1.1 -0.67 1.743

-10 to +10 1.804 -0.261 2.273 -40 to +40 -0.821 -0.556 -0.651 -10 to -1 0.412 0.43 0.009 0 to +1 -0.069 -0.201 0.253 0 to +5 1.163 -0.66 1.937

T Test Small & Equity


-10 to +10 -1.88 -1.174 -0.906 -40 to +40 -3.945 -2.309 -2.737 -10 to -1 -0.611 -1.308 0.335 0 to +1 -1.336 -1.085 0.472 0 to +5 -1.149 -1.001 0.393

T Test Large & Cash


-10 to +10 -0.027 -0.252 0.007 -40 to +40 -0.726 -0.862 -0.524 -10 to -1 0.532 -0.092 0.54 0 to +1 -0.701 0.006 -0.664 0 to +5 -0.795 0.515 -0.823

T Test Large & Equity


-10 to +10 -0.842 -1.77 -0.344 -40 to +40 -0.186 -0.734 0.084 -10 to -1 -1.657 -0.571 -1.601 0 to +1 -0.847 -1.159 -0.685 0 to +5 -0.61 -2.241 0.105

Appendix IX _____________________________________________________________________


Appendix IX:

Alpha & Beta Estimates

All Companies

Company Alpha Beta 1001 0.000565819 0.3093303431002 0.004207257 0.3906784491003 0.002072767 0.11645361004 -0.000370216 0.1842671511005 0.000328806 0.1998411541006 0.001202081 0.7699544911007 0.00379852 0.9465668611008 0.000415663 0.5365958091009 0.005148706 0.001525741010 0.002742081 0.3525952671011 0.001168113 0.267294051012 0.000779508 0.1593124961013 0.001352373 0.5445224561014 -0.002249385 0.1897597361015 0.002187708 0.9945040021016 0.000591882 1.0508873711017 0.002105626 1.2608937331018 8.2608E-05 0.2671345841019 0.001241111 0.2682806941020 0.000579008 1.1929902971021 6.3315E-05 0.212801761022 0.00072644 0.5625377861023 3.849E-05 0.2253857791024 0.000878427 0.9636051041025 0.001270741 0.7877776971026 -0.001249185 0.4591633761027 -0.001812273 1.206705871028 0.000245656 0.3466702161029 -0.001483555 0.3045911952001 0.003589395 0.950249962002 0.000776635 0.1050275112003 0.00848726 -0.1672585562004 0.000509284 0.0023422972005 0.002631582 0.2854192062006 -0.002331694 -0.101532732007 0 02008 0.014566804 -1.1118543622009 0.001550027 -0.0796662542010 0.000754481 0.8328877662011 0.003841799 0.1357901092012 0.000939601 0.0413927692013 0.002793081 0.6319063472014 0.000614241 0.8203128532015 0.001080896 1.6493394432016 -0.001382433 1.0730277912017 0.000645697 1.628754731

Appendix IX _____________________________________________________________________


2018 0.000412853 0.2864467562019 0.004582896 0.8584533362020 0.003493985 0.3874549892021 0 02022 9.58607E-05 0.3376929372023 -0.001763555 0.7755469852024 0.000990861 0.1793372942025 -0.00147984 0.4363183982026 -0.000362975 -0.0739961972027 0.004159814 0.3882663242028 -0.002098035 0.3812718442029 -0.000212087 0.9258792352030 0.002549944 1.4693945412031 -1.18934E-05 0.1068268712032 -0.000156822 0.0794457062033 0.000767268 0.6977462612034 -0.001046034 0.0501420032035 -0.000428453 -0.2289218122036 0.000244439 0.0168233632037 0.006927787 -0.3224092112038 0.003659752 -0.7637555582039 -0.00139072 -0.1380705292040 0.000950285 -0.2319725112041 0.000427437 -0.0414765442042 -0.001988223 -0.2612698972043 0.001708993 -0.2910896372044 -7.79388E-05 -0.0014813012045 -0.001304792 0.374891761

Average 0.001122633 0.370525532Ave 1992 0.00091821 0.519745761Ave 2000 0.00128261 0.268747429

Screen Dump _____________________________________________________________________


Documents

Dissertation Gary J Ford Oct 2005[1]