Hostile takeovers: A study on public takeover bids on the Swedish stock market

Abstract: This Master Thesis analyses the takeover bids placed on the Swedish stock market between 1995 and 2008, with a focus on hostile takeover bids. Our sample consists of 216 takeover bids, of which 172 are classified as friendly and 44 as hostile, i.e. they have initially been rejected by the target company board of directors. By using an event study with six different time intervals, we have analysed the economic impact for target shareholders that arise from the announcement of a takeover bid. We have looked at the Cumulative Abnormal Return (CAR) of each target company and across all our tests found higher average CAR for hostile bids than friendly bids, which is in line with previous foreign research, even though the difference is not statistically significant. Moreover, we have tested whether we could find any ability in the market to predict the future of a hostile bid - whether it will be raised or not, and whether it will be successful or not. Even though no such ability could be proved with statistical significance, we saw that as time passed by post the announcement of a takeover bid, the ability to predict whether it would eventually be successful improved. We also show that a successful outcome is closely linked to the existence of a raised bid. In addition to our quantitative research we provide the reader with a general overview of the public Swedish takeover bids and their characteristics.