Are Cross-Listed Firms Superior Targets? Evidence from Short- and Long-Run Performance of US Bidders

Abstract

We examine the impact of the cross-listing status of target firms and cross-country institutional differences on short- and long-run performance of US bidders in cross-border acquisitions. We show that acquirers realize higher long-run returns when acquiring foreign targets cross-listed on US markets, suggesting a more successful post-merger integration and greater merger synergies. Moreover, we find that lower integration of the target market to global economies and higher cultural differences result in higher bidder's announcement-period returns when acquiring targets cross-listed in the US. This result suggests that cross-listing may play a significant role in lowering the acquisition costs induced by market segmentation. We also provide new evidence for the hypothesis of corporate governance transfer through mergers and acquisitions by examining its effects on acquirer returns. We show that, in the long term, the acquirer benefits from transferring its good corporate governance practices to the target.

Keywords: Cross-listing, mergers & acquisitions, corporate governance, market integration, short- and long-run performance, Sarbanes-Oxley Act

JEL Classification: G15, G34, K00