Post-Takeover Restructuring and the Sources of Gains in Foreign Takeovers: Evidence from U.S. Targets

50 Pages Posted: 9 Feb 2005

See all articles by Jun-Koo Kang

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Jin-Mo Kim

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Wei-Lin Liu

School of Finance, Shanghai University of Finance and Economics (SUFE)

Sangho Yi

affiliation not provided to SSRN

Date Written: January 2005

Abstract

We examine post-takeover restructuring activity and the sources of gains in large U.S. targets of foreign acquirers. We find that layoffs and selloffs are less important in justifying the target premium in foreign takeovers than in domestic takeovers. In contrast, U.S. targets in foreign takeovers subsequently make more post-takeover investments than those in domestic takeovers. The likelihood of these post-takeover restructuring activities is significantly influenced by target characteristics. Finally, the U.S. Tax Reform Act of 1986 has had a significant positive effect on target returns. These results suggest that the realization of synergy is the main motive behind foreign takeovers.

Keywords: Foreign takeover, Source of gains, Restructuring, Layoffs, Selloffs, Tax Reform Act of 1986, Target returns, Synergy

JEL Classification: G34, F30

Suggested Citation

Kang, Jun-Koo and Kim, Jin-Mo and Liu, Wei-Lin and Yi, Sangho, Post-Takeover Restructuring and the Sources of Gains in Foreign Takeovers: Evidence from U.S. Targets (January 2005). Available at SSRN: https://ssrn.com/abstract=664665 or http://dx.doi.org/10.2139/ssrn.664665

Jun-Koo Kang (Contact Author)

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Jin-Mo Kim

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

Wei-Lin Liu

School of Finance, Shanghai University of Finance and Economics (SUFE) ( email )

Shanghai, 200433
China

Sangho Yi

affiliation not provided to SSRN ( email )

No Address Available

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