The Impact of Merger and Acquisition on Value at Risk (VaR): A Case Study of China Eastern Airline

Fung, Ka Wai Terence and Wan, Wilson (2013): The Impact of Merger and Acquisition on Value at Risk (VaR): A Case Study of China Eastern Airline. Published in: International Research Journal of Finance and Economics No. 110 (2013)

Abstract

This paper attempts to examine the impact of merger and acquisition on Value at Risk (VaR) of China Eastern Airline. The VaR is estimated for the whole sample and pre-merger periods by three methods: RiskMetrics , AR-GARCH and Generalized Extreme Value (GEV). The regression-based model reports the highest VaR followed by RiskMetrics and GEV. All models report a low VaR after the 11 June, 2009 merger, indicating a negative impact of merger and acquisition on VaR.

• Item Type: MPRA Paper
• Language: English
• Keywords: Value at Risk, merger and acquisition, GARCH
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance

References

[1] Basel Committee on Banking Supervision. (1988). Internal Convergence of Capital Measurement and Capital Standards, Basel: BIS.

[2] Best, P. (1998). Implementing Value at Risk, Chichester: John Wiley & Sons.

[3] Cles, S. (2001). An Introduction to Statistical Modeling of Exreme Values. Springer-Verlag, New York.

[4] Jorion, P. (2002). "How informative are value-at-risk disclosures?", The Accounting Review, 77(4), pp. 911-931.

[5] King, D. R., Dalton, D. R., Daily, C. M., & Covin, J. G. (2004). Meta-Analyses of Post-Acquisition Performance: Indications of Unidentified Moderators. Strategic Management Journal, 25(2), pp. 187-200

[6] Laabs, J., & Schiereck, D. (2010). The long-term success of M&A in the automotive supply industry: determinants of capital market performance. Journal of Economics & Finance, 34(1), pp. 61-88.

[7] Smith, R.L. (1989). Extreme Value analysis of environmental time seris: A application to trend detection in ground-level ozone. Statistical Science 4:367-393.

[8] Tardivo, G. (2002). "Value at Risk (VaR): The new benchmark for managing market risk", Journal of Financial Management and Analysis, 15(1), pp. 16-26.

[9] Tsang, R., & Leung, P. (2009). Driving mergers through successfully in the auto industry. Retrieved 11 17, 2012, from China Daily: http://www.chinadaily.com.cn/bw/2009-12/28/content_9235036.htm