| dc.description.abstract | According to Ross, Westerfield, Jaffe and Jordan (2009, Chapter 29), companies mainly engaging in M&A activities either for creating synergy effects or for tax considerations. This study focuses on the research question regarding if there were synergy effects for the merger of Epistar and Lextar corporations. First, I determine if the sum of market values of the two companies increases after the announcement of merger on 18 June, 2020, so as to detect if the market reactions indicate any synergy effects. Second, by establishing market models and by using the OLS regressions starting a year prior to the merger, I investigate how the daily returns of two companies are affected by the returns of TWII Index, or by the returns of Taiwan Se Optoelec Index, respectively. By employing the returns predicted by using the market models of the two companies, I then examine if the two companies enjoy excess returns after they announced the merger.
The empirical findings by using the above two methods are consistent: according to the reactions from the stock market, there are no synergy effects following the announcement of the merger of Epistar and Lextar corporations. In addition, I find that the returns of Lextar increases, while the returns of Epistar decreases after the announcement with statistical significance, indicating the market seems to view the former as the target firm and the latter the acquirer.
Differs from the extant literature in M&As which focuses mainly on cases where one company acquires the other and only the former continues, this study investigates a case where a “new venture” is created by the two companies after the merger. This research thus provides new insight to the research field of M&As. | en_US |