This year’s winner of Toronto CFA Society’s Annual Fellowship Award for Doctoral Dissertations in the Fields of Finance & Economics is Fred Davis of the Queen’s School of Business who submitted three related essays on signalling and price dynamics in mergers and acquisitions.

• The first examined and confirmed statistically that the act of raising capital signals an increase in takeover probability for a forthcoming target.
• The second reveals through the examination of price-volume dynamics that investors incorporate the increased likelihood of a takeover attempt into target firm returns without necessarily resorting to illegal insider trading and,
• The final essay uses multivariate regression analysis to conclude that raising capital in close proximity to an acquisition announcement date is associated with significant increases in both target firm returns as well as takeover premiums paid by acquiring firms.

The three essays provide evidence that raising capital can act as both a statistically and economically significant signal to all market participants of a forthcoming takeover attempt. Notably, by raising capital in close proximity to announcing a takeover attempt, bidding firms may be increasing the takeover premium paid for the target firm and thus incurring a capital market penalty or “capital punishment” amounting to an approximate 25 percent increase in the premium.

We congratulate the winner of the 2011 award.

The Toronto CFA Society Annual Fellowship Award for Doctoral Dissertations in the Fields of Finance & Economics is given to dissertation proposals judged to add to the body of knowledge about Canadian debt, equity or derivatives and other markets, with particular emphasis on regulation, accounting, corporate governance, taxation, applied securities valuation and performance attribution. Papers submitted for consideration must not have been published or accepted for publication. The $10,000 award is open to doctoral candidates whose dissertation proposals have been approved by participating Ontario universities with doctoral programs in the field of finance or economics, but whose final dissertation has not been approved.