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Testing Hubris Hypothesis for Mergers in Pakistan: Using Event Study Technique

Author

Listed:
  • M Fahad Siddiqui

    (Institute of Management Sciences, Peshawar)

  • Shah Wali Khan

    (Institute of Management Sciences, Peshawar)

Abstract

Hubris Hypothesis for mergers (Roll, 1986) is the benchmark for testing the effect of merger on the value of the firm. In this study, the Hubris Hypothesis has been tested for mergers in Pakistan by using the event study technique (MacKinlay, 1997). 42 events of mergers in Pakistani Stock Market during the period 2000-2012 have been considered for study purpose. The study concludes that the Average Abnormal Returns (AAR) tend to be positive in pre-merger period and negative in post-merger period but the Hubris Hypothesis does not sustain as true for mergers in Pakistan.

Suggested Citation

  • M Fahad Siddiqui & Shah Wali Khan, 2013. "Testing Hubris Hypothesis for Mergers in Pakistan: Using Event Study Technique," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 5(2), pages 89-105, October.
    • Handle: RePEc:bec:imsber:v:5:y:2013:i:2:p:89-105
    DOI: dx.doi.org/10.22547/BER/5.2.7
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    File URL: http://imsciences.edu.pk/files/journals/Vol.%205%20No.%202%20October%202013/(7)%20Testing%20Hubris%20Hypothesis%20outline.pdf
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    More about this item

    Keywords

    Hypothesis; mergers; average abnormal returns; event study;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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