An Event Study Analysis of the Nexen-CNOOC Takeover: Implications for the Canadian Market

Abstract

The CNOOC bid for Nexen was one of the most publicly scrutinized takeovers in Canadian history due to ambiguous language in the Canadian Investment Act. This paper aims to examine how the markets reacted to the lengthy bidding process. Performing an event study analysis on sectors of the Canadian stock market, using new information as a means to show abnormal returns in the different sectors, we can see how the takeover impacted the Canadian stock market sectors. As a proxy for new information, news articles and statements by various market influencers were taken from a Bloomberg terminal. The Bloomberg terminal also captured the daily stock market information for 170 companies over 166 days. Sectors that are more open to international investment, and considered backbone sectors, were more impacted than those that are mostly isolated from international pressures.