MEASURING THE STOCK RETURNS OF TELECOMMUNICATIONS AND INTERNET COMPANIES BY STUDYING THE EFFECTS OF FREQUENT MERGERS AND ACQUISITIONS
Open Access
- Author:
- Obeidat, Leen
- Area of Honors:
- Telecommunications
- Degree:
- Bachelor of Arts
- Document Type:
- Thesis
- Thesis Supervisors:
- Sascha Dero Meinrath, Thesis Supervisor
Krishna Prasad Jayakar, Thesis Honors Advisor - Keywords:
- M&A's
Mergers and Acquisitions
Telecommunications
Internet
Market Capitalization
Stock Returns - Abstract:
- This research paper aims to analyze a popular investment strategy in the technology and telecommunications market sectors. Over the years, it has been evident that many companies in these industries believe that the larger they grow in size, the better. This study challenges that notion by assessing the effect of frequent mergers and acquisitions on market capitalization and comparing the results of companies that merge and acquire frequently with comparison companies that do so less frequently. The hypothesis undergirding this thesis research is to see whether there is a difference between companies that frequently acquire or merge with other companies and those that do not. For the purposes of this study, the median split method was utilized to divide the largest companies within two market sectors (technology and telecommunications) into two groups and assess the change in market capitalization over a ten-year period. Then correlation and regression methods were used to further analyze the data. This analysis focuses on the largest wireless providers and the largest Internet companies by total revenue in the United States in the fiscal year 2016-2017. The analysis captures performance data from 2007 until 2017. After studying these, it is concluded that contrary to the dominant narrative that frequent mergers and acquisitions are “good for business”, there is no clear difference between high and low M&A investment strategy on market capitalization. Companies in both industries performed well in some instances and not very well in others. These findings raise questions about the popular notion that growing larger in these industries is a road to success, but rather that each company should customize its strategy to fit its needs.