Executive Summary:
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. For a sample of 4,430 acquisitions between 1985 and 1995 and controlling for various factors we find that U.S. firms who acquire cross-border targets relative to those that acquire domestic targets experience significantly lower announcement stock returns of approximately 1 percent and significantly lower changes in operating performance. 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. We find that bidder returns are positively related to takeover activity in the target country and to a legal system offering better shareholder rights. With the exception of the U.K., the target country's degree of economic restrictiveness is negatively related to bidder returns.
Key words: Cross-border acquisitions; bidder gains, global diversification
JEL classification: G31: G32; G34
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