Merger as Strategic Partnership to Support SDG: A Positive Signal for Investors in Stock Market of APEC Member Countries


A merger is one of the strategic partnerships undertaken by a firm to pursue future growth and sustainability. Merger information signals a firm’s prospects to investors in the stock market. The present study examines investors’ reactions toward merger announcements under the different payment methods. The sample comprised 115 firms from the member countries of the Asia-Pacific Economic Cooperation (APEC) that announced a merger between 2014 and 2018. The study employed the event study to test whether the bidding firm generates abnormal returns during the time surrounding the merger announcement and evaluate the differences in the returns between cash and stock payment of the merger. The results revealed that cash payment earned a significantly higher abnormal return post- than the pre-merger announcement, while there was no significant abnormal return for the period of pre- compared to the post-merger announcement in stock payment. Additionally, cash payments generated significantly higher cumulative average abnormal returns than stock payments. These findings imply that investors’ sentiments respond more positively to cash financing. The study confirms the signaling theory in which a firm action announcement conveys information to investors in the stock market.

Keywords: merger, event-study, APEC, sustainability

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