An Investigation of Australian Takeover Firm Returns from an Investor Viewpoint

This study employs comprehensive data from the Australian market to investigate takeover firm returns from an investor viewpoint. Specifically, an examination of investor trading behaviour, the share price impact, and the apportionment of the takeover wealth gains for four investor classes which are the domestic domiciled nominees, superannuation (pension) funds, incorporated companies, and individuals, is undertaken. The empirical evidence confirms finance theory and prior research findings that investors realise a takeover return which is commensurate with their information level. The evidence further indicates that takeover gains vary by type of investor and whether the trade is aggressive or passive, as well as if an investor class is informed. An unexpected research outcome is, however, that individuals represent an informed trader for takeovers and realise a superior result. An additional unexpected outcome is that nominees are a sophisticated but uninformed trader who realise a negligible return but who are responsible for the share price movement. This paper consequently contributes to the literature by going beyond the standard “target-bidder” dichotomy of takeover returns