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The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions

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  • Doukas, John
  • Travlos, Nickolaos G

Abstract

This study presents direct evidence on the effect of international acquisitions on stock prices of U.S. bidding firms. Shareholders of multinational corporations not operating in the target firm's country experience significant positive abnormal returns at the announcement of international acquisitions. Shareholders of U.S. firms expanding internationally for the first time experience insigni ficant positive abnormal returns, while shareholders of multinational corporations operating already in the target firm's country experience insignificant negative abnormal returns. The abnormal returns are larger when firms expand into new industry and geographic markets-especially those less developed than the U.S. economy. Copyright 1988 by American Finance Association.

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Bibliographic Info

Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 43 (1988)
Issue (Month): 5 (December)
Pages: 1161-75

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Handle: RePEc:bla:jfinan:v:43:y:1988:i:5:p:1161-75

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Cited by:
  1. Rahman, Manzur & Deshpande, Shreesh, 1997. "Convertible bond calls by multinational and domestic firms: an agency cost perspective," Journal of Multinational Financial Management, Elsevier, vol. 7(1), pages 43-54, April.
  2. Reid W. Click & Paul Harrison, 2000. "Does multinationality matter? Evidence of value destruction in U.S. multinational corporations," Finance and Economics Discussion Series 2000-21, Board of Governors of the Federal Reserve System (U.S.).
  3. Kiymaz, Halil, 2009. "The impact of country risk ratings on U.S. firms in large cross-border acquisitions," Global Finance Journal, Elsevier, vol. 20(3), pages 235-247.
  4. Francis , Bill B & Hasan , Iftekhar & Sun , Xian, 2006. "Financial market integration and the value of global diversification: evidence from US acquirers in cross-border mergers and acquisitions," Research Discussion Papers 24/2006, Bank of Finland.
  5. Gregory, Alan & McCorriston, Steve, 2005. "Foreign acquisitions by UK limited companies: short- and long-run performance," Journal of Empirical Finance, Elsevier, vol. 12(1), pages 99-125, January.
  6. M. S. B. Aw & R. A. Chatterjee, 2004. "The performance of UK firms acquiring large cross-border and domestic takeover targets," Applied Financial Economics, Taylor and Francis Journals, vol. 14(5), pages 337-349.
  7. Kiymaz, Halil, 2004. "Cross-border acquisitions of US financial institutions: Impact of macroeconomic factors," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1413-1439, June.
  8. Linda Allen & Julapa Jagtiani & Stavros Peristiani & Anthony Saunders, 2002. "The role of bank advisors in mergers and acquisitions," Staff Reports 143, Federal Reserve Bank of New York.
  9. Burns, Natasha & Liebenberg, Ivonne, 2011. "U.S. takeovers in foreign markets: Do they impact emerging and developed markets differently?," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1028-1046, September.
  10. Bodnar, G.M. & Tang, C. & Weintrop, J., 1998. "Both Sides of Corporate Diversification: The Value Impacts of Geographic and Industrial Diversification," Weiss Center Working Papers 98-02, Wharton School - Weiss Center for International Financial Research.
  11. Chang, Shao-Chi & Huang, Ping-Chang, 2002. "Corporate multinationalism, organizational learning, and market reaction to international joint ventures: Evidence from Taiwan," Global Finance Journal, Elsevier, vol. 13(2), pages 181-194.
  12. Eun, Cheol S. & Kolodny, Richard & Scheraga, Carl, 1996. "Cross-border acquisitions and shareholder wealth: Tests of the synergy and internalization hypotheses," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1559-1582, November.
  13. Lulu Gu & W. Robert Reed, 2011. "One For All or All For One? Using Multiple-listing Information in Event Studies," Working Papers in Economics 11/33, University of Canterbury, Department of Economics and Finance.
  14. Picou, Armand & McDaniel, William R. & Rosenberg, Sidney, 1996. "Resolving international agency cost in East/West joint ventures," Global Finance Journal, Elsevier, vol. 7(1), pages 115-127.
  15. Beck, John C. & Larsen, Alan B. & Pinegar, J. Michael, 1996. "The wealth effects of non-equity alliances The U.S.-Japanese licensing experience," Pacific-Basin Finance Journal, Elsevier, vol. 4(4), pages 393-408, December.
  16. Waheed, Amjad & Mathur, Ike, 1995. "Wealth effects of foreign expansion by U.S. banks," Journal of Banking & Finance, Elsevier, vol. 19(5), pages 823-842, August.
  17. Biswas, Rita & Fraser, Donald R. & Mahajan, Arvind, 1997. "The international market for corporate control: Evidence from acquisitions of financial firms," Global Finance Journal, Elsevier, vol. 8(1), pages 33-54.
  18. Dasgupta, Sudipto & Sengupta, Kunal, 1995. "Optimal regulation of MNEs and government revenues," Journal of Public Economics, Elsevier, vol. 58(2), pages 215-234, October.

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