IMPACT OF ACQUISITION AND DISPOSAL ANNOUNCEMENTS ON PROPERTY STOCKS: EVIDENCE FROM 2000 TO 2008

Abstract

This research adopts the event-study methodology to examine the impact of acquisition and disposition announcements on property stocks as well as REITs listed on the Singapore Exchange (SGX). The study makes use of evidence from 2000 to 2008. It was found that acquisition and disposal announcements do influence the companies’ market value in the form of abnormal positive returns. This is especially true when the intent to acquire and dispose was announced. These results are similar to a research by Asquith (1983) who found significant cumulative abnormal returns for the announcement of the intent to merge. Furthermore, results also show that positive abnormal returns are exemplified when companies acquire a business division and/ or subsidiary instead of realty.

This paper goes further to investigate the difference when property companies and Real Estate Investment Trusts (REITs) announce acquisitions and disposals. Results show that property companies experience greater abnormal returns than REITs due to the higher frequency of acquisitions as described by Glascock et al (1991).