Stock-market reactions to mergers of non-financial Turkish firms
This study investigates stock-market reactions to mergers of non-financial Turkish firms. I conduct an event study to detect abnormal stock returns of Turkish target firms around merger announcements. In an efficient market, movements in stock prices (returns) reflect investors’ assessments of new information about the firm and its operating environs. Assuming market efficiency, event studies model “normal” returns. Abnormal returns are the difference between realized returns and normal returns. The sample consists of 125 mergers from July 1991 to July 2009. This study reveals that Turkish targets earn on average a cumulative abnormal return of 8.56% in the three-day window around merger announcements when control rights in target firms change hands. This study contributes to the merger literature by providing evidence that markets react positively to merger announcements of Turkish target firms. However, reaction of Turkish markets generates smaller returns than the reaction of US and European markets. Stock market’s reaction to merger announcements may differ from country to country as well as announcement date specification is problematic for Turkish firms which may be the reason for smaller returns in Turkish markets.