Short-Term Impact of Cross-Border Acquisitions on Firm's Value: An Analysis of 1997-2019

Introduction

The thesis by the author Jani Jokinen seeks to address how short-term impact on acquiring a firm's value. The author's starts by identifying the objective of the thesis as the aim to explore the most significant cross-border acquisition in Finland and listing down some of the short-term impacts on acquiring share that arises from the company during the year 1997-2019. In this regard, the author mainly dwells about the short-term effects rather than the long-term impacts that affect the performance of Finnish cross-border accusations. There is a need to look at the long-term impacts to help the author make a comparison and suggest a viable suggestion on how to improve the productivity of the firms. Moreover, in his research, Jokinen focused only on forty firms in Finland, bearing in mind that there is more firm in Finland. The identification of more firm for research implies that the author could be able to make a better comparison of the main short-term impacts that are present on the acquisition of the firm value in Finland.

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The author seems to have used an event study methodology approach, which explains the announcement impacts of M&A on the acquisition of the share prices of a company. In result analysis, AAR and CAAR outcomes were analyzed ten days before and nine days after the announcement. In the analysis of the initial results, there is evidence that the Finnish largest cross-border acquisition does not establish value for the acquisition of the company's shareholders. However, the result does not show a consistency of the assumption that acquisition is motivated by synergy merits. In this note, there should be a correlation with the assumption made before and the results obtained after the results. On the analysis of the second results, there is a piece of evidence that the cash payment method creates a positive collective abnormal return in the entire period. Despite some of the analysis of the results liming with the assumption, the author fails to show complete data in the research conducted in the various nation from 1997-2006. In table one on Finnish cross-border acquisition, Lithuania, for instance, does not have complete data, which makes it hard to make a viable and credible comparison on transaction value.

In this study, there a contradiction of results and the previous research that was carried out concerning the acquisition of companies' performance. Therefore, there is no correlation between this research and the previous researches, which means there is a need to improve on the methods that were employed to gather data and in results analysis. For instance, according to Bruner (2002), there is a summary of forty-four studies that established that out of this number, seventeen of them gave share price increase while the remaining number thirteen out of the total number established that there was a decrease in share prices for the acquiring companies. The empirical literature supports the fact that cross-border gives high returns compared to domestic acquisition. The Author needs to carry more research to establish whether, in Finnish cross-border, there is an acquisition that exceeds the value of 500 million US dollars in providing abnormal returns for the acquisition of the company shareholders in the short run.

Apart from several weaknesses that are encountered in this research, the Author has established two detailed hypotheses in an attempt to explain whether Finnish cross-border that is M &A gives wealth increase for the acquisition of shareholders in companies. In one of the hypotheses, the Author brings about a question of whether Finnish cross-border can come up with a positive market reaction in the acquisition of various companies' share price is a short run. The second hypothesis establishes a question on whether Finnish cross-border gives a positive market reaction in the short run, mainly when a cash payment is made in cash form. The problem with this research is that research criteria and the suitability of thesis are not well-explained. In figure eight, the data analysis method used is not well analyzed for someone to understand. The Author should have used a more simple way of data analysis, such as a bar graph or a pie chart for clarity. It is complicated for an ordinary reader to explain the trend between AAR and CAAR results, as illustrates in this diagram.

Despite weakness that are there in this thesis, the Author has made a significant attempt to elaborate hypothesis being presented and problems giving pretty of illustrations and examples both from credible secondary sources, and critically evaluating the findings. If this study is well carried out, the Author will get results that are more accurate compared to the previous one, bearing in mind he has a reasonable hypothesis of the research. The Author should employ other methods of data collection and analysis to get accurate results to achieve the objective of the study. Moreover, Jokinen should use more example of research that have been done before to make a precise comparison with his search. For instance, there is a correlation between Hogholm (2015) and Jokinen research on the effects of cash payment where the results seems to be similar. Therefore, there is a need for the Author to use more previous research for comparison with his research.

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