This study examined the 336 merger data where the merging firm is a stock-listed firm among the mergers publicly announced at the Financial Supervisory Service from 2000 to March 2011 as the primary samples and utilized standard event study methodology to analyze the merger public announcement effect. This study analyzes the effects of Korea company mergers announcements on stock price's risk adjusted rate of return using maket model. The abnormal return before and after the merger public announcement date was measured and graphed to confirm that there exists a merger public announcement effect, and this effect during the event period was used to confirm that semi-strong form efficient market hypothesis is valid in case of merger public announcement. Evidence here supports semi-strong market efficiency along with a positive signal exhibited by the sample of merging firms during the event period.
From the primary sample, 286 merger data where the elementary statistical data of major merger-related variables can be acquired were taken as the secondary data, and univariate tests and multivariate tests were conducted for the influence of merger types and financial characteristics of merged firms on the abnormal return. In the empirical analysis on the secondary merger samples, entire merger samples, back-door listing separated samples, and non-back-door listing merging firm samples, and the case where the price of merger and the intrinsic value of merged firm calculated by an external appraisal organization differ were differentiated and study results were drawn.
Summarizing the single variate analysis and regression analysis results, in the analysis regarding the entire samples, the smaller the size of the merging firm and the greater the debt ratio of the merging firm, and in case of diversifying merger or in case of non-affiliated mergers, there were positive influences on the cumulative abnormal return.
As the result of analysis differentiating the merger samples which are backdoor listings and those that are not, the backdoor listing samples had positive influences in case of a greater debt ratio, and in case of non-affiliated mergers. For the non-backdoor listing merger samples, non-affiliated mergers, and those that were not small-sized or simple mergers had positive influences on the cumulative abnormal return, and especially the share percentage held by the largest shareholder, which was not significant in other models, had a positive influence on the cumulative abnormal return. This appears to indicate that the positive public announcement effect of the share percentage held by the largest shareholder on the market is large in case of backdoor listing separated from the entire merger.
When a stock-listed firm merges with a non-listed firm, if the price of merger is not the intrinsic value calculated by an external appraisal organization, it will differ from the intrinsic value, and this difference was called merger premium in this study, and was inserted into the existing multiple regression analysis model to see if it has a significant influence on the cumulative abnormal return, but as the result, it did not have a significant influence.