Sellers's reactions to takeover rumours and announcements before M&A: the event study on hose

Abstract

This paper examines the trading activity of target firms in the days before acquisition announcement. Using a sample of acquisition announcements in HOSE during the period of 2012 - 2016, the results showed that significantly abnormally trading volume precedes share price movements. In order words, using intraday data, active-selling in target shares in pre-announcement increased, which compensates rising active-buying. It means that sellers might lose a lot of money if an unexpected acquisition occurs. Thereforee, the explanations showed that sellers are the mixture of liquidity and noise traders who overreact to takeover rumours. Furthermore, it might lose money when an acquisition is actual. It is consistent since most cases of acquisition rumours are materializing into public announcements. Results also provide evidence that highly uncertain information in takeover rumours are reflected by pre-announcement.