An Event Study of Announced and Completed Cross Border Acquisition in the Philippines: A Test of the Acquisition Probability Hypothesis

Frederick P. Romero


This study uses the Acquisition Probability Hypothesis to analyze the consequences of cross-border acquisitions on the cumulative daily abnormal returns of target firms and their rivals from 1997-2009. Accordingly, rival firms of initial acquisition targets receive abnormal returns because of the increased likelihood that they will be targets themselves. The descriptive research design is used. The sampling frame includes all announced and completed acquisitions coursed through the Philippine stock exchange. The statistical tool used is the Event study methodology and significance was set at 5% significance level, two-tailed. The results showed that the target firms realized significantly positive abnormal returns over the 21-day, 11-day, 5-day, and 3-day event windows surrounding the announcement proposal period. Alternatively, the target firms’ rival companies earned insignificant abnormal returns across all event windows. For deals where the acquisition proposals become completed, the targets and their rivals did not received any significant abnormal returns.


Abnormal returns; Cross border acquisition; Event study

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