Corporate Acquisitions and Firm-Level Uncertainty: Domestic versus Cross-Border Deals

Abstract

This paper studies the impact of corporate acquisitions on the uncertainty faced by acquiring firms. We use data for UK public companies from 2004 to 2017 and employ a matching estimator combined with difference-in-differences to control for the endogenous selection of firms into acquiring status. Acquisitions exert a large and persistent effect on the volatility of stock returns of acquirers and is characterized by a pecking order: domestic takeovers lead to a reduction in the uncertainty faced by the acquirer, while cross-border acquisitions-particularly those involving target firms in emerging markets-engender a positive response in acquirers' volatility.