M&A is commonly used in developed countries like U.S. as a means of survival or a strategy for growth by firms. And it is chosen for easing entry into new business, business expansion, increase of market share and risk diversification.
In 1997, according to Negotiation Group on Basic Telecommunication (NGBT) agreement, the world telecommunication market gets unified, and globalized, and increase of use of Internet made the boundary of services between voice and data ambiguous as well as brought about keen competition among services, which accelerated the liberalization in telecommunication market and introduction of competitive system in the market. Hence, to secure competitiveness in the world telecommunication market, M&A and strategic cooperation are emerging.
In worldwide M&A trends, on December 1999, SKT, dominant carrier, announced the acquisition of STI, which was the first sign of reorganization in Korean mobile telecommunication market. This announcement made the competitiveness of existing three PCS carriers weaker. So, it was natural for these PCS carriers to try to penetrate domestic market by cooperating abroad telecommunication carriers and strengthen competitiveness through M&A and strategic cooperation. One of the examples was M&A between KTF and KTM.
All the earlier papers published in Korea, which deal with the effects of M&A, did event analysis with large samples. These kinds of papers lacked detailed analysis of the effects of separate announcement in one firm. I concentrated on the effects of separate announcement and short-run performance in domestic firm related to M&A.
To obtain the announcement effects related M&A, I chose event study as methodology and to estimate announcement effects, I used market model. To my study, I found the cumulative abnormal returns (CAR) from day 0 to day 3 and from day 0 to day 5 from the announcement events, respectively. The results are as follows.
First, the public announcement of M&A had more ...