An analysis of short‐run performance of cross‐border mergers and acquisitions

Moshfique Uddin · Agyenim Boateng

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Corporate Finance and Governance Financial Markets and Investment Strategies International Business and FDI

Abstract

Purpose The aim of this paper is to consider the short‐run performance of UK firms acquiring foreign target firms over a period of 1994‐2003 and to explore the impact of deal size and other firm‐specific factors on performance. Cross‐border mergers and acquisitions have witnessed a substantial growth worldwide, with the UK being one of the top acquiring nations in the global market for corporate control. Design/methodology/approach The paper first uses event study methodology to analyse short‐run share price performance. Then a univariate analysis to examine the factors influencing the short‐run performance based on a sample of 373 acquisitions over the period of 1994 to 2003. Findings The study finds that the UK acquirers do not earn statistically significant positive abnormal returns in the short‐run. Univariate analysis shows that short‐run performance of UK acquirers is influenced by the form of target, acquisition strategy, geographical origin of target firm and the payment methods. However, the study finds no support for size of acquisition deal as a determinant of performance of acquiring firm. Originality/value The paper attempts to shed more light and extend existing research in cross‐border mergers and acquisitions by examining short‐run performance and factors influencing performance.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 2000Investor protection and corporate governance 1976The Future of the Multinational Enterprise 1995OVERCOMING THE LIABILITY OF FOREIGNNESS.1983The market for corporate control 1977INFORMATIONAL ASYMMETRIES, FINANCIAL STRUCTURE, AND FINANCIAL INTERMEDIATION

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2018Pre & Post-Merger Financial Performance: An Indian Perspective 2016Do cross-border and domestic bidding firms perform differently? New evidence from continental Europe and the UK 2017Cross-border vs. domestic acquisitions: Evidence from India 2014Impact of Domestic and Cross-Border Acquisitions on Acquirer Shareholders’ Wealth: Empirical Evidence from Indian Corporate 2018Impact of Organizational Learning and Absorptive Capacity on the Abnormal Returns of Acquirers: Evidence from Cross-Border Acquisitions by Indian Companies

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