Abnormal returns to acquirers and their determinants in the global personal luxury goods industry

Abstract

The impact of M&A deals on the stock prices of acquiring firms has been extensively studied in the event study literature. By measuring the abnormal returns from acquisitions in different industries or regions, researchers have reported mixed results concerning the short- and long-term effects of those events. In similar studies, the determinants of the abnormal returns have been examined by looking at the influence of transaction-, bidder- and target- specific characteristics. The purpose of this thesis is thus to evaluate the performance of acquirers operating in the personal luxury goods industry as well as its drivers. First of all, the luxury market and its associated takeover activity are presented. The purpose is to underline the relevance of this research for this uncommon sector. The event study literature is then summarized together with its underlying assumptions. The short-and long- term abnormal returns from M&A announcements identified in the prior country- or industry- specific studies are thus reported. The impact of the prevailing drivers of the post- announcement performance on the abnormal returns is also outlined. Secondly, the data gathering process and the criteria applied to clean the sample are introduced. The methodologies to detect and assess the size of the abnormal returns from M&A deals over short-and long-term periods are then detailed. We report each approach with its associated statistical tests. The cross-sectional regressions used to determine the impact of specific variables on the abnormal returns are further presented. Then, the results of both short-and long-term methodologies are reported with the results of the regressions in the subsequent order. Firstly, the abnormal returns measured around the deal announcement date are introduced. They highlight the positive impact of the event over a 3-day time window. The long-term abnormal returns measured with the buy-and-hold benchmark procedure are then presented. However, only the calendar-time abnormal return approach is considered as reliable for our post-announcement findings. This approach does not report any abnormal return in the long-term which is consistent with the efficient market hypothesis. Finally, the significance of GDP per capita related variables in the target country identified in the regressions outlines their positive relationship with the abnormal returns.