| Summary: | Different studies in developed capital markets have found positive abnormal returns of at
least 15% during the announcement date of a tender offer. Although there are almost no
studies for South American stock markets, one study reported positive abnormal returns,
ranging from 25% to 50%, related to the announcement of the first tender offer. This study
argues that estimated positive abnormal returns in emerging markets are high because studies
have assumed a completely segmented capital market by applying the market model with a
local stock market index. By allowing for partial integration among five South American
emerging markets, one shows that there are in fact positive abnormal returns previously,
during, and after the announcement date of the first tender offer. However, the positive
abnormal return associated to the announcement date is around 8%. A slightly higher abnormal
return is obtained using a market model that accounts for partial integration and downside
risk. These results prompt towards a lower positive abnormal return in the sample of South
American firms studied
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