Do Foreign Takeovers Affect Currency Risk Exposure?

25 Pages Posted: 17 Sep 2012

See all articles by Nihat Aktas

Nihat Aktas

WHU - Otto Beisheim School of Management

Jean-Gabriel Cousin

Univ. Lille, ULR 4112 - LUMEN

Junyao Zhang

SKEMA Business School - Lille Campus

Date Written: April 6, 2012

Abstract

The paper examines cross-border takeovers through the lens of currency risk management. Using a sample of 152 large cross-border deals undertaken by listed French firms, the study document that, acquirers are firms with higher exposure to target currency prior to the takeover announcement. The value of the acquiring firm becomes less sensitive to the target currency following the transaction. Acquirer abnormal returns are also positively associated with a decrease in exposure to the target currency. The gain is economically substantial. For an acquirer worth €100 million in equity, a one-unit decrease in currency exposure leads to a euro gain of €1.68 million.

Keywords: Cross-border takeovers, Currency risk exposure, Abnormal returns

JEL Classification: G34

Suggested Citation

Aktas, Nihat and Cousin, Jean-Gabriel and Zhang, Junyao, Do Foreign Takeovers Affect Currency Risk Exposure? (April 6, 2012). 29th International Conference of the French Finance Association (AFFI) 2012, Available at SSRN: https://ssrn.com/abstract=2079575 or http://dx.doi.org/10.2139/ssrn.2079575

Nihat Aktas (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Jean-Gabriel Cousin

Univ. Lille, ULR 4112 - LUMEN ( email )

1 place Déliot - BP381
Lille Cedex, 59020
France
33-3-2090-7606 (Phone)
33-3-2090-7629 (Fax)

Junyao Zhang

SKEMA Business School - Lille Campus ( email )

Avenue Willy Brandt, Euralille
Lille, 59777
France

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