Do Cross-Border and Domestic Bidding Firms Perform Differently? New Evidence from Continental Europe and the UK

57 Pages Posted: 29 Jul 2015

See all articles by Miroslav Mateev

Miroslav Mateev

American University in Bulgaria - Business and Economics Department; American University in the Emirates

Kristiyan Andonov

Protrade Mega Group Ltd.

Date Written: April 28, 2015

Abstract

In this paper we investigate the main features of the domestic and cross-border corporate acquisitions involving 38 European countries in the period 2003-2010. The analysis is based on characteristics of takeover transactions such as the type of transaction, relative value of the deal, payment method, legal status of the target firm, and activity relatedness, amongst other factors. In addition, we investigate the short-term wealth effects of 2,821 European mergers and acquisitions initiated by large and medium-sized European public firms. We find that, upon announcement, domestic acquiring firms earn higher abnormal returns than cross-border bidders. Our findings are in line with those reported on the US market and are robust when we control for different bid and firm characteristics. Moreover, we find that bidding firm’s shareholders gain more in equity offers than in cash offers whether the acquisition is cross-border or domestic. When a Continental European target is involved, the bidder abnormal returns are higher than those of bids involving a UK or Irish target. We observe that cross-border bidding firms tend to experience lower announcement returns if target firms are located in countries with strong investor protection mechanisms. That is, bidding firms from Continental Europe must compensate target firm shareholders (i.e., pay higher premiums) if the quality of the corporate governance is reduced.

Keywords: mergers and acquisitions, domestic and cross-border takeovers, bidder gain, corporate governance, investor protection

JEL Classification: F23, G14, G34

Suggested Citation

Mateev, Miroslav and Mateev, Miroslav and Andonov, Kristiyan, Do Cross-Border and Domestic Bidding Firms Perform Differently? New Evidence from Continental Europe and the UK (April 28, 2015). Available at SSRN: https://ssrn.com/abstract=2636515 or http://dx.doi.org/10.2139/ssrn.2636515

Miroslav Mateev (Contact Author)

American University in Bulgaria - Business and Economics Department ( email )

Blagoevgrad, 2700
Bulgaria

American University in the Emirates ( email )

Dubai International Academic City
Dubai, 503000
United Arab Emirates
00971529907492 (Phone)

HOME PAGE: http://www.aue.ae

Kristiyan Andonov

Protrade Mega Group Ltd.

52 Vitosha street
Sofia, 1000
Bulgaria

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