| Summary: | This research analyzes the effect of acquirer and target firms� stocks
liquidity to acquirers� returns performance. Amihud illiquidity is used as a
stock liquidity proxy, while cumulative abnormal returns (CARs) and buy-
hold abnormal returns (BHAR) are used as returns performance proxy.
Results show that acquirer�s stock liquidity has strong and significant
negative effect in surrounding announcement date, in one-month, two-years,
and three-years post-announcement date. In other hand, target�s stock
liquidity has positive effect in surrounding announcement date and one-
month post-announcement date. In a multiple regression analysis, acquirer�s
stock liquidity effects which are controlled by firm size and firm leverage
have prediction values between 15.7% and 24.3% in short-term returns
performance and around 7% in two-years and three-years post-
announcement returns performance.
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