Abstract

In this paper I study the abnormal returns of different subsample of rival firms of takeover targets at their takeover announcement. Using latest data from 1990 to 2013, I confirm that rival firms earn positive and significant returns over target announcement period. Furthermore, after dividing the rivals into large rival portfolio and small rival portfolio, results show that the positive abnormal return is primarily earned by large rivals rather than small rivals. It is consistent with the hypothesis that large rival firms in the industry are expected to benefit more in the event of initial takeover, and large rivals are expected to become more competitive after initial merger, compared to relatively smaller rivals.