Are Cross-Border Acquisitions Different from Domestic Acquisitions? Evidence on Stock and Operating Performance for U.S. Acquirers
45 Pages Posted: 6 Feb 2006
Abstract
We provide empirical evidence on how cross-border acquisitions from the perspective of an U.S. acquirer differ from domestic transactions, based on stock and operating performance measures. The distinction between domestic and cross-border acquisitions is a function of the change in market integration, which shifts the balance between the relative costs and benefits of cross-border versus domestic acquisitions. Furthermore, recent evidence on the costs of global diversification suggests another reason for a distinction between cross-border and domestic acquisitions. For a sample of 4,430 acquisitions between 1985 and 1995 and controlling for various factors we find that U.S. acquirers experience significantly lower stock and operating performance for cross-border than for domestic transactions. Stock returns are negatively associated with an increase in both global and industrial diversification. Cross-border takeover activity has increased during the past decade and the observed difference in bidder gains is more pronounced for the latter half of the sample period. With the exception of the U.K., bidder returns are negatively related to the target country's degree of economic restrictiveness. Lower bidder gains for cross-border transactions are consistent with the acquirer's inability to correctly value or capture synergies in cross-border takeovers.
Keywords: Cross-border acquisitions, global diversification, bidder gains
JEL Classification: F30, G30, G34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
New Evidence and Perspectives on Mergers
By Gregor Andrade, Mark L. Mitchell, ...
-
Do Managerial Objectives Drive Bad Acquisitions?
By Randall Morck, Andrei Shleifer, ...
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures
By Robert Comment and G. William Schwert
-
Does Corporate Performance Improve after Mergers?
By Paul M. Healy, Krishna Palepu, ...
-
Managerial Performance, Tobin's Q, and the Gains from Successful Tender Offers
By Larry H.p. Lang, Ralph A. Walkling, ...