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Geography and Acquirer Returns

29 Pages Posted: 15 Mar 2006  

Simi Kedia

Rutgers Business School

Venkatesh Panchapagesan

The Goldman Sachs Group, Inc.

Vahap Bülent Uysal

University of Oklahoma

Date Written: December 20, 2005

Abstract

We examine the impact of geographical proximity on the acquisition decisions of US public firms over the period 1990-2003. Transactions where the acquirer and target firms are located within 100km of each other are classified as local transactions. We find that acquirer returns in local transactions are more than twice that in non-local transactions. The higher returns to local acquirers are, at least partially, due to information advantages arising from geographical proximity. These information advantages facilitate acquisition of targets that on average create higher overall return. However, bidders use their information advantages to earn a higher share of the surplus created.

Keywords: Mergers and acquisitions, geography, asymmetric information, synergy gains

JEL Classification: G34

Suggested Citation

Kedia, Simi and Panchapagesan, Venkatesh and Uysal, Vahap Bülent, Geography and Acquirer Returns (December 20, 2005). Available at SSRN: https://ssrn.com/abstract=871513 or http://dx.doi.org/10.2139/ssrn.871513

Simi Kedia (Contact Author)

Rutgers Business School ( email )

117 Levin
94 Rockafellar Road
Piscataway, NJ
United States
8484454195 (Phone)

Venkatesh (Venky) Panchapagesan

The Goldman Sachs Group, Inc. ( email )

85 Broad Street
New York, NY 10004
United States

Vahap B. Uysal

University of Oklahoma ( email )

307 West Brooks
Norman, OK 73019-4004
United States
405-325 5672 (Phone)

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