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Cross-Border M&A: Cultural Disparities and the Associated Wealth Effects

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Author Info

  • Fang (Helga) He

    (Department of Management, Southern Illinois University¡XCarbondale, U.S.A.)

  • Feng-Shun (Leo) Bin

    (Department of Business Administration, University of Illinois at Springfield, U.S.A.)

  • Dar-Hsin Chen

    (Department of Business Administration, National Taipei University, Taiwan)

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    Abstract

    This study employs event-study methodologies to examine the stock price behaviors of US target firms surrounding the 1996¡V2005 cross-border M&A events related to corporate offers. We further apply factor analysis with country fixed-effect specifications to identify the determinants that may significantly contribute to the abnormal stock performance associated with cross-border M&A. While the sample target firms are all headquartered in the US, the foreign corporate bidders are grouped into various subsamples based on their countries of origin and presumably distinct cultures. Our evidence suggests that cultural disparities could play an important role in determining stock price performance around M&A public offer announcements.

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    Bibliographic Info

    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 7 (2008)
    Issue (Month): 2 (August)
    Pages: 89-100

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    Handle: RePEc:ijb:journl:v:7:y:2008:i:2:p:89-100

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    Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.ijbe.org/
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    Related research

    Keywords: M&A; cultural disparities; event studies; wealth effects;

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    References

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    1. Bekaert, Geert & Hodrick, Robert J, 1992. " Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 467-509, June.
    2. Kathleen Fuller & Jeffry Netter & Mike Stegemoller, 2002. "What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions," Journal of Finance, American Finance Association, vol. 57(4), pages 1763-1793, 08.
    3. Agrawal, Anup & Jaffe, Jeffrey F & Mandelker, Gershon N, 1992. " The Post-merger Performance of Acquiring Firms: A Re-examination of an Anomaly," Journal of Finance, American Finance Association, vol. 47(4), pages 1605-21, September.
    4. R. Glenn Hubbard & Darius Palia, 1999. "A Reexamination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View," Journal of Finance, American Finance Association, vol. 54(3), pages 1131-1152, 06.
    5. Roberto A. Weber & Colin F. Camerer, 2003. "Cultural Conflict and Merger Failure: An Experimental Approach," Management Science, INFORMS, vol. 49(4), pages 400-415, April.
    6. Bengt Holmstrom & Steven N. Kaplan, 2001. "Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 121-144, Spring.
    7. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
    8. Franks, Julian R. & Harris, Robert S., 1989. "Shareholder wealth effects of corporate takeovers : The U.K. experience 1955-1985," Journal of Financial Economics, Elsevier, vol. 23(2), pages 225-249, August.
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