Location, Proximity, and M&A Transactions
Journal of Economics & Management Strategy, Forthcoming
47 Pages Posted: 1 Oct 2009 Last revised: 25 Aug 2015
Date Written: August 18, 2015
In this paper, we examine how the geographic location of firms affects acquisition decisions and value creation for acquirers in takeover transactions. We find that firms located in an urban area are more likely to receive a takeover bid and complete a takeover transaction as a target compared with firms located in rural areas, and takeover deals involving an urban target are associated with higher acquirer announcement returns, after controlling for the proximity between the target and the acquirer. In addition, a target’s urban location significantly attenuates the negative effect of a long distance between the target and the acquirer on acquirer returns, a fact that is documented in the existing literature. Our findings reveal a previously underexplored force—firm location—that can affect takeover transactions, in addition to proximity. Our paper suggests that a firm’s location plays an important role in facilitating the dissemination of soft information and enhancing information-based synergies.
Keywords: geographic location, proximity, takeover exposures, acquirer announcement returns, soft information
JEL Classification: G14, G30, G34
Suggested Citation: Suggested Citation