Foreign acquisitions in the United States: Effect on shareholder wealth of foreign acquiring firms

Cakici, Nusret; Hessel, Chris; Tandon, Kishore

doi:10.1016/0378-4266(94)00131-6

Cited by 121 publications

(71 citation statements)

References 20 publications

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“…As expected, the sign of this variable is negative, indicating that the market attaches less value to international acquisitions when the company involved is highly active in the international environment. This finding is similar to Cakici et al (1996), who found also that the extent of overseas exposure is negatively related to shareholders' wealth. Doukas (1995) also found a negative relationship where the bidder has ongoing operations in the target countries.…”

Section: Cross-sectional Wealth Effects For European Takeoverssupporting

confidence: 89%

International acquisitions and shareholder wealth Evidence from the Netherlands

Corhay

Rad

2000

International Review of Financial Analysis

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In this article, we test wealth effects of international acquisitions using a sample of foreign acquisitions by Dutch firms during the period 1990-96. We find weak evidence that cross-border acquisitions are wealth-creating corporate activities, especially for acquisitions in the U.S. We observe further that for the West European acquisitions, benefits from internalization are larger for companies having relatively less international exposure and making acquisitions outside of their main activities.

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Section: Cross-sectional Wealth Effects For European Takeoverssupporting

confidence: 89%

International acquisitions and shareholder wealth Evidence from the Netherlands

Corhay

Rad

2000

International Review of Financial Analysis

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“…In marked contrast, many studies (Markides & Ittner,1994;Schwert, 1996;Cakici et al 1996;Maquieira et al 1998;Eckbo & Thorburn, 2000;Kohers & Kohers, 2000;Doukas et al 2002;Kiymaz, 2003;Beitel et al, 2004) observe positive return. The studies find significant positive abnormal returns for acquiring firms (upto seven per cent) around the announcement.…”

Section: Literature Review and Hypothesesmentioning

confidence: 90%

Impact of Domestic and Cross-Border Acquisitions on Acquirer Shareholders’ Wealth: Empirical Evidence from Indian Corporate

Rani¹,

Yadav²,

Jain

2014

IJBM

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The present paper compares the impact of domestic acquisitions and cross-border acquisitions on Indian acquirer shareholders' wealth during [2003][2004][2005][2006][2007][2008]. A segregated analysis has also been conducted to measure the impact of stake/control acquired, based on a sample of acquisitions of 268 domestic and 255 target firms across border. Further, this paper also analyses the short-run performance of percentage of stake/control acquired in both type of acquisitions. The stake/control acquired is divided into two categories: (i) complete acquisition and (ii) partial/majority control acquisition. Event study methodology has been conducted to analyse the share price performance of Indian acquirers in short-term. The findings reveal that cross-border as well as domestic acquisitions enhance shareholders' wealth of the acquirer company on the announcement. The results indicate that cross-border acquisitions generate higher returns than domestic acquisitions. Nonetheless, the segregated analysis makes it evident that the shareholders of acquiring firms of complete cross-border acquisitions earn higher abnormal returns (significant at 5 per cent). The abnormal returns are higher (though statistically insignificant) for partial/majority control domestic acquisitions.

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“…We also use a variable Forex to look at the impact of foreign exchange rate variation on announcement returns (Buckley et al, 2012). Following Cakici et al (1996), Eun et al (1996) and Kang (1993), we calculate the relative strength of the exchange rate as the deviation of the foreign exchange rate at announcement date from its 12-month average. To control for foreign direct investment activity in India, we include a variable Inflow/Outflow which is the ratio of yearly inward investments to yearly outward investments from India (Buckley et al, 2012 We compute daily abnormal returns using a standard event study methodology (Cartwright and Schoenberg, 2006;Gubbi et al, 2010;Haleblian et al, 2006;McWilliams and Siegel, 1997;Moeller and Schlingemann, 2005).…”

Section: Methodsmentioning

confidence: 99%

Euphoria in financial markets: How Indian companies generate value in their cross-border acquisitions

Rao‐Nicholson

Ayton

2016

Research in International Business and Finance

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In this paper, we investigate the effect of euphoria on returns derived by Indian companies in their cross-border acquisitions. Cognitive legitimacy generated at the country level facilitated firms in deriving higher value from internationalization. In addition, overoptimism after the legitimacy-building event led to euphoria in financial markets and short-term abnormal returns. Hence we argue that the springboard effect created by legitimacy is short-lived, as euphoria fades away over time. Using cross-border and domestic acquisitions by Indian companies during 1999-2009, and controlling for fundamental factors, both financial and non-financial, we find support for our euphoria hypothesis. Because of overoptimism, Indian companies experienced short-term abnormal returns in their cross-border acquisitions in the few years following the legitimation process, but not in later years.

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Foreign acquisitions in the United States: Effect on shareholder wealth of foreign acquiring firms

Cited by 121 publications

References 20 publications

International acquisitions and shareholder wealth Evidence from the Netherlands

International acquisitions and shareholder wealth Evidence from the Netherlands

Impact of Domestic and Cross-Border Acquisitions on Acquirer Shareholders’ Wealth: Empirical Evidence from Indian Corporate

Euphoria in financial markets: How Indian companies generate value in their cross-border acquisitions

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