In this study, we examined the effect of a corporate takeover on the shareholders’ wealth in the Hong Kong equity market between 1986-1991. The regulatory framework for takeovers in Hong Kong is different from the UK. Under this regulatory framework, we find that the shareholders of target firms obtain large positive abnormal returns around the announcement day. In contrast, there are no significant abnormal returns for the shareholders of bidding firms. Finally, excess trading volume of target firms occurs before the event day. These results indicate that the takeover event is anticipated. Copyright © 1993 Academic Press. All rights reserved.