Analysis the Effect of Merger and Acquisition on Shareholder Wealth of Acquiring Company

Abstract

Yuwati (2004): Analysis The Effect of Merger and Acquisition on Shareholder Wealth of Acquiring Company: Jogjakarta, Accounting Department, Faculty of Economics, Universitas Islam Indonesia. Merger and acquisition are business strategies to expand and allocate resources of company. The most dominant reason to do a merger is to achieve synergy or create firm value that mainly enhances shareholder wealth. In short term, synergy can be measured by using event study method, by observing stock price to find abnormal return around announcement day. A controversy whether merger and acquisition create synergy becomes interesting subject discussion. Some researchers stated that shareholder of acquiring company often suffer negative return. This research will analyze the effect of merger and acquisition on shareholder wealth of acquiring company. The result of hypothesis 1 shows that merger and acquisition positively effect shareholder wealth of acquiring company. However, the result of hypothesis 2 indicates that there is no significant different of average abnormal return (AAR) before or after merger and acquisition. This indicates that shareholder wealth of acquiring company increases from merger and acquisition activity, but statistically it is not different before and after M&A announcement.