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This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s shareholders than acquisitions of publicly listed firms.

The authors analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets over the period 1990-2011. The analysis controls for a wide range of bidder, deal and target country characteristics that are likely to correlate with the target’s listing status and acquirer abnormal returns. The authors also use a selection model to address the endogenous choice of the target’s listing status.

The results indicate that bidders experience significantly higher abnormal returns of about 1.7 per cent in the 11-day event window when the target is a private firm. The authors show that this result is broad-based and persistent. It does not appear to depend on whether the target is small or large; whether it is related or unrelated to the bidder’s industry; whether it is in the resources sector; and whether the transaction is domestic or cross-border. They find some evidence that bidder returns might be stronger for larger acquisitions, for unrelated targets, and in poor market conditions such as in the wake of the recent global financial crisis.

The research would benefit from the inclusion of the bidding firm’s ownership and governance characteristics.

The results support the view that market frictions contribute to make private firms attractive targets.

The analysis confirms the pervasiveness of the listing effect in a market characterized by a lesser degree of competition, higher search costs and the significance of the natural resources sector.

The purpose of this paper is to examine the information content in the Standard & Poor (S&P) 500 index revision and its impact on the corporate bonds and earnings of the firms whose stocks are added to or deleted from the index.

The paper uses panel regressions on a 13-year sample of the companies added and deleted from the S&P 500 index.

The regression results on the bond yields and earnings show that analysts and investors draw positive (negative) information from Index additions (deletions) and adjust their expectations of the firm performance as well as the required rates of return on corporate bonds after index revisions.

The paper suggests that deletions from the Index have significantly negative impacts on corporate bonds and earnings performance of deleted firms while additions to the index do not have significant impacts on the bonds or realized earnings of added firms.

This paper uses corporate bonds and earnings to test competing hypotheses proposed to explain the excess stock returns of index revision, including information content hypothesis and liquidity hypothesis. The results are consistent with the information content hypothesis and do not support the liquidity hypothesis.