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Target industry takeover competition and the wealth effects of mergers and acquisitions: International evidence

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  • Hussain, Tanveer
  • Loureiro, Gilberto

Abstract

This paper studies how target industry takeover competition affects shareholder gains around mergers and acquisitions (M&As). We find that target industries with higher M&A activity negatively (positively) affect bidder (target) announcement returns, while the impact on bidder-target combined returns is negligible. The results corroborate the overpayment argument of acquiring targets from competitive industries. Importantly, we document that the lower bidder announcement returns associated with higher industry takeover competition are mitigated when bidders are from countries with better institutional quality, suggesting that country governance can prevent bidder managers from overpaying the targets.

Suggested Citation

  • Hussain, Tanveer & Loureiro, Gilberto, 2023. "Target industry takeover competition and the wealth effects of mergers and acquisitions: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:intfin:v:89:y:2023:i:c:s1042443123001336
    DOI: 10.1016/j.intfin.2023.101865
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    More about this item

    Keywords

    Industry takeover competition; Mergers and acquisitions; M&A returns; corporate governance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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