Page 88 - Azerbaijan State University of Economics

N.V. Abdullayeva: Value creation through mergers and acquisitions in energy sector

Pitfalls of event study approach:

1. May be applied to only public companies thus narrowing the sample

2. Insider trading and rumors around the company may impact the study and

deliver biased results.

3. Several announcements at the same time may create a problems to define and

choose the window period

5. Data description and Event Study Results

In order to test our model and analyze the behavior of security stocks during

announcement of corporate event, the sample of 100 companies engaged in M&A

activity was selected. For objective of the research the sample comprises of energy

companies with deal announcement day between 2000 and 2014. The information

regarding stock prices, transactions and other financial performance was extracted from

Bloomberg, Datastream, Zephyr and corporate web pages of companies. As one of the

prerequisites of event study methodology, only public companies listed on stock

exchanges are included in analysis, both targets and acquirers. In order not to have

biased results, the companies that had more than one corporate event over same period

of time are excluded from the analysis. As a control benchmark, market indexes were

selected for each security.

First, the list of the M&A deals between 2000 and 2014 were obtained from

Bloomberg. In order to be included in our study, companies had to meet the

following criteria:

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