When Do Bidders Gain? The Difference in Returns to Acquirers of Listed and Unlisted Targets

Abstract

We examine announcement period excess returns to acquirers of listed and unlisted targets in 17 Western European countries over the interval 1996 through 2001. Acquirers of listed targets earn an insignificant average excess return of -0.38%, while acquirers of unlisted targets earn a significant average excess return of +1.48%. This "listing effect" in acquirers' returns persists through time and across countries and remains after controlling for the method of payment for the target, the acquirer's size and Tobin's Q, pre-announcement leakage of information about the transaction, whether the acquisition created a blockholder in the acquirer's ownership structure, whether the acquisition was a cross-border deal, and other variables. The fundamental factors that give rise to the listing effect, which has also been documented in U.S. acquisitions, remain elusive.