Abstract:
This study attempts to examine the impact of mandatory offer announcements on
stock return on the Colombo Stock Exchange and highlights the mandatory offers
and its grounds in the legal system in Sri Lanka. Although there are number of studies
done on mandatory offers, it is hard to find the studies on impact of mandatory offers
on stock return in Sri Lankan context. The primary aim of this study is to study the
impact of mandatory offers on stock return in Colombo Stock Exchange using the
sample from year 2010 to 2014. The study used secondary data for the purpose of
analysis employing the event study methodology. More specifically, it employs the
market model in generating abnormal returns surrounding mandatory offer
announcement. The findings of this study demonstrated that on average market
reacts positively to mandatory offer announcements. The market takes considerable
time to fully incorporate information contained in mandatory offer announcements by
the bidder firms and considerable anticipatory effect reflect the target firms. This
research will be important to all those take interest in the share market. Especially it
is more important to the investors, managers of the companies’ stock exchange
regulatory agencies in their decision making.
