The Impact of Stock Market Conditions on M&A Effectiveness

When a bidder announces a M&A deal, investors react either positively via purchasing stock, or negatively through the sale of the acquirer’s stock. Different factors (payment method, type of a target, the same industry and others) influence this M&A effectiveness reflected in the return of buyer’s stock. However, it is also essential to take into account the state of stock market, which is rarely studied in M&A effectiveness’s analysis. The purpose of the thesis is to determine how the stock market conditions influence the investor’s expectations of M&A deal success for an acquiring company, that reflects in changes of bidder’s stock price and determines M&A effectiveness. The main hypothesis of the thesis is that stock market features have a significant impact on the cumulative average abnormal return of the bidder’s stock. The object of the research is the effectiveness of M&A for buyers operating in the developed and emerging capital markets on the example of the US and Chinese markets. The subject of the thesis is the impact of stock market conditions on the effectiveness of M&A deals for companies acting as buyers. In the thesis regression models were built for each market and each event window. The model includes five variables of the state of the stock market and seven variables, reflecting the most often used factors to measure deal’s performance, according to the previous studies.