Takeover Offers and Intra-Industry Effects - An Empirical Analysis of Rival Firms' Stock Price Reactions

Abstract: Using a data set containing 162 takeover offers in the Swedish stock market, we conduct an event study to investigate industry rivals' stock price reactions to takeover offers within the same industry. Our findings indicate that the abnormal returns of industry rivals are not significantly affected by the takeover offers. By applying interquantile regressions we are able to show that there is no statistically significant increase in variance for rival firms around the event date either, which is unexpected. Testing for differences in-between industries, it appears that industry rivals' cumulative abnormal returns are centered around zero regardless of industry type. Additionally there seems to be no correlation between abnormal return of target firms and the abnormal return of rival firms around the takeover announcement.