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Intraday volatility and trading volume after takeover announcements
Institution:1. The Mutual Group Financial Services Research Centre, School of Business and Economics, Wilfrid Laurier University, Waterloo, Ont., N2L 3C5, Canada;2. School of Business Administration, University of Western Ontario, London, Ont., N6A 3K7, Canada;3. Faculty of Management, University of Calgary, Calgary, Alb., T2N 1N4, Canada;4. Bank of Montreal, Toronto, Ont., Canada;1. Department of Accounting Information, National Taichung University of Science and Technology, Taichung, Taiwan;2. Department of Business Administration, Nan Kai University of Technology, Nan-Tou, Taiwan;3. Department of Business Administration, Thunghai University, Taichung, Taiwan;4. Department of Senior Citizen Service Management, National Taichung University of Science and Technology, Taichung, Taiwan;1. School of Law, Tel Aviv University, and ECGI, Israel;2. Graduate School of Business, Bar Ilan University, and ECGI, Israel;3. Graduate School of Business, Bar Ilan University, Israel;1. Toulouse Business School, 20 Boulevard Lascrosses, 31068 Toulouse, France;2. The University of Sydney Business School, Sydney 2006, NSW, Australia;3. University of Bergamo, Via Pasubio 5b, 24044 Dalmine, Italy
Abstract:This paper examines transactions data regarding the market's reaction to 258 takeover announcements on the Toronto Stock Exchange (TSE) from 1977 to 1989. The study analyzes volatility and volume of target firm's stock during the first trading day following a takeover announcement. A cross-sectional analysis relates this intraday volatility and volume to various aspects of a takeover announcement that proxy for the certainty of payoff to shareholders. Post-announcement volatility is highest when takeover announcements involve share exchange bids which are contested. Trading volume is highest when bids are contested and involve a large initial price change.
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