Home  Journals  Financial Analytics: Science and Experience  34(220) - 2014 September

Assessment of mergers and acquisitions in the energy sector of the Russian Federation on the based on the cumulative excess returns

Available online: 1 September 2014

Subject Heading: Financial market

JEL Classification: 

Pages: 12-21

The article considers the practical and methodological aspects of the evaluation of mergers and acquisitions. In the theoretical part of the paper, the authors classify hindsight of the assessment of the effectiveness of mergers and acquisitions transactions; analyze the pros and cons of each of these methods. The paper, in more detail, considers the methodology of calculation of the cumulative abnormal return of mergers and acquisitions as a way of evaluating their effectiveness. The authors provide the specific algorithm for calculating the efficiency of transactions. In addition, the article provides an overview of the literature on the topic, mostly from foreign sources. The calculation of the efficiency serves as the practical part of the study and it is measured as the cumulative excess returns within the five and fifteen day interval, and authors provide an analysis of mergers and acquisitions in the energy sector of the Russian Federation. The article provides an overview of 360 transactions made during the period from 1999 to 2013. The cumulative excess return is considered across the sample as a whole, as well as a sample in the context of domestic and cross-border transactions. The authors analyze the results using the methods of descriptive statistics and construction of histograms. The paper reveals that during conducting of the transactions of mergers and acquisitions, the Russian companies of the energy sector have positive excess profitability, and that during declaration on cross-border transactions, the excess yield of the Russian companies is lower than during declaration of domestic transactions. Results of the study have both theoretical and practical values. In terms of the practical application, the findings will be useful while organizing the mergers and acquisitions transactions in the energy sector.

Keywords: mergers and acquisitions, cross-border transactions, transaction efficiency, cumulative excess returns, CAR, energy

References:

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