Mark Friesen et al. (Asia Pacific Journal of Applied Finance, Vol. I, No. 5, p. 1-15
In this study we analyze the wealth effects of M&A transactions testing a sample of 52 acquisitions by the Swiss flag carrier Swissair between 1995 and 2001. During this period, Swissair followed an aggressive acquisition strategy that led the former leading European airline finally into bankruptcy. We therefore measure the stock price reactions around the announcement days when Swissair publicly declared its interest to acquire. Looking at the overall announcement effects, we find small positive abnormal returns for the event days that turn negative when the event windows become larger. This holds true for acquisitions of airlines, airline-related businesses as well as for unre-lated businesses, and stands in clear contrast to the results of other studies that analyze M&A transactions in the US airline industry. Therefore, we conclude that the stock market did obviously realize the shortcomings of Swissair’s acquisition strategy a lot earlier than its own management.