Stock Market Reaction to Mergers and Acquisitions in Anticipation of a Subsequent Related Significant Event: Evidence from the Korean Telecommunications Industry

Abstract

The objective of this paper is to assess the effect of mergers and acquisitions on shareholder wealth when subsequent related significant events are anticipated. We identify a particular merger and acquisition between telecommunication companies in Korea and examine whether it conveys good or bad news to stock market participants. We hypothesize and find that mergers and acquisitions are interpreted as good news by the marketplace when they are expected to be accompanied by a subsequent related significant event, in our case granting of a government license for the IMT-2000 mobile service.Mergers and acquisitions, telecommunications industry, IMT-2000, mobile service