Domestic and Cross-Border Effect of Acquisition Announcements: A Short-Term Study for Developed and Emerging Countries

34 Pages Posted: 12 Jul 2019

See all articles by Florian Otto

Florian Otto

Getulio Vargas Foundation (FGV)

Joelson Oliveira Sampaio

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Vinicius Brunassi Silva

Fundação Escola de Comércio Álvares Penteado (FECAP)

Date Written: June 30, 2019

Abstract

By using a multi-country set of acquirers from 14 different markets, this paper aims to develop a global understanding of the impact of acquisition announcements on developed - and emerging-market acquirers. We adopt an empirical event-study approach to investigate the effect of acquisition announcements on the share price of bidding firms. Our sample contains 624 acquisition announcements with target firms located throughout the world between 1997 and 2015. The results contradict the conventional wisdom that developed-market acquirers generally experience losses. Both emerging-market and developed-market bidders gain significantly in the short term. Moreover, for developed-market acquirers, the announcement of cross-border acquisitions (CBAs) yields higher abnormal returns than the announcement of domestic acquisitions. On the other hand, emerging-market bidders gain from announcing domestic acquisitions, and lose substantially when publishing news about CBAs. In addition, the level of institutional environment in the target country is found to have an impact on acquirer returns.

Keywords: Acquisitions, Abnormal Returns, Cross-border Acquisitions, Institutional Environment

JEL Classification: 213

Suggested Citation

Otto, Florian and Sampaio, Joelson Oliveira and Brunassi Silva, Vinicius Augusto, Domestic and Cross-Border Effect of Acquisition Announcements: A Short-Term Study for Developed and Emerging Countries (June 30, 2019). Available at SSRN: https://ssrn.com/abstract=3412581 or http://dx.doi.org/10.2139/ssrn.3412581

Florian Otto

Getulio Vargas Foundation (FGV) ( email )

R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

Joelson Oliveira Sampaio (Contact Author)

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Brazil

HOME PAGE: http://eesp.fgv.br/

Vinicius Augusto Brunassi Silva

Fundação Escola de Comércio Álvares Penteado (FECAP) ( email )

Av. Liberdade, 532
Liberdade
São Paulo, SP 01502-001
Brazil
+551199518-5913 (Phone)

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