Abstract

http://ssrn.com/abstract=1480831
 
 

References (41)



 


 



Locations, Proximity, and M&A Transactions


Ye Cai


Santa Clara University - Leavey School of Business

Xuan Tian


Indiana University - Kelley School of Business

Han Xia


University of Texas at Dallas - Naveen Jindal School of Management

March 24, 2014


Abstract:     
We examine how a firms’ geographic location affects acquisition decisions and value creation in takeover transactions. We analyze both the individual and interaction effects of three dimensions of firms’ locations: (1) the target’s location, (2) the proximity between the acquirer and the target, and (3) the acquirer’s location. We show that a firm located in an urban area has a higher takeover exposure, and generates a higher acquirer announcement return. We also find that the target’s urban location attenuates the negative effect of a long distance between the target and the acquirer on value creation as documented in the existing literature. This attenuation effect further interacts with the acquirer’s location, and is particularly strong when the acquirer does not have easy transportation to the target, and hence, the target’s urban location is more valuable in facilitating accessibility. Our findings reveal a previously underexplored force — firm locations, in addition to proximity — that can impact takeover transactions. They suggest that firm locations play an important role in facilitating the dissemination of soft information and helping the enhancement of information-based synergies.

Number of Pages in PDF File: 48

Keywords: geographic locations, proximity, takeover exposures, acquirer returns, soft information

JEL Classification: G14, G30, G34

working papers series


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Date posted: October 1, 2009 ; Last revised: March 25, 2014

Suggested Citation

Cai, Ye and Tian, Xuan and Xia, Han, Locations, Proximity, and M&A Transactions (March 24, 2014). Available at SSRN: http://ssrn.com/abstract=1480831 or http://dx.doi.org/10.2139/ssrn.1480831

Contact Information

Ye Cai
Santa Clara University - Leavey School of Business ( email )
500 El Camino Real
Santa Clara, CA California 95053
United States
Xuan Tian (Contact Author)
Indiana University - Kelley School of Business ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx
Han Xia
University of Texas at Dallas - Naveen Jindal School of Management ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
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