Abnormal Returns of Japanese Acquisition Bidders - Impact of Pro-M&A Legislation in the 1990s

Abstract

This paper examines the market’s reaction to news of corporate mergers and acquisitions (M&A) by Japanese bidders during the 1990s. Domestic versus global bids and pro-M&A legislation are considered as determinants of bidders’ abnormal returns. The results show that bidders for domestic targets earn significant abnormal returns after the institutions of pro-M&A legislation in Japan. These findings help determine gains from trading strategies for M&A deals in Japan, and provide insight into the current M&A environment in Japan as shaped by pro-M&A legislation.

Keywords: Japan, Merger and acquisition, Abnormal returns, Big bang reform, Legislation, Corporate governance, Bank

JEL Classification: G14, G18, G34, G38, M40