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Home vs. Cross-Border Takeovers: Is There Any Difference in Investor Perception?

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  • ATM Adnan

Abstract

This paper attempts to portray the empirical difference in investors' perception towards the cross-border and domestic merger and acquisition (M&A) announcements of UK acquirer firms reflected through the significant abnormal stock return. The researcher conducts a short-run event study on the daily stock return of 100 UK bidding firms (50 involved in domestic and 50 involved in cross-border M&As between 2015 and 2016) to compare any significant abnormal returns (AAR and CAAR) around the event announcement period. National and international mergers and acquisitions have witnessed a considerable expansion globally, with the United Kingdom being one of the pioneers in the worldwide market for corporate domination. Research results exhibit that in domestic M&A bidding, firms experience a significant positive announcement return (CAAR) in the event window (t1 ̶ t0) redolent to the positive expectation of investors from the M&A transaction. However, the post-announcement negative return concurrently proves the initial overreaction of investors and the semi-efficient market hypothesis. Foreign M&As result in an insignificant positive return (CAAR) in all the three event windows. There was existence of a positive trend in the cross-border pre-event return (AAR) indicative of narrow possibilities of insider trading or investors' optimistic anticipation, but this is not significantly conclusive.

Suggested Citation

  • ATM Adnan, 2018. "Home vs. Cross-Border Takeovers: Is There Any Difference in Investor Perception?," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2018(2), pages 59-84.
    • Handle: RePEc:prg:jnlefa:v:2018:y:2018:i:2:id:210:p:59-84
    DOI: 10.18267/j.efaj.210
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    More about this item

    Keywords

    Mergers and Acquisitions; Cross-border; Domestic; Shareholders; Abnormal return;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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