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Post-takeover Restructuring and the Sources of Gains in Foreign Takeovers: Evidence from U.S. Targets

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Author Info

  • Jun-Koo Kang

    (Michigan State University)

  • Jin-Mo Kim

    (University of Missouri–Kansas City)

  • Wei-Lin Liu

    (Michigan State University)

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    Abstract

    We examine post-takeover restructuring activity and the sources of gains in large U.S. targets of foreign acquirers. We find that layoffs and sell-offs are less important in justifying the target premium in foreign takeovers than in domestic takeovers. In contrast, U.S. targets in foreign takeovers subsequently make more post-takeover investments than those in domestic takeovers. The likelihood of these post-takeover restructuring activities is significantly influenced by target characteristics. Finally, the U.S. Tax Reform Act of 1986 has had a significant positive effect on target returns. These results suggest that the realization of synergy is the main motive behind foreign takeovers.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 79 (2006)
    Issue (Month): 5 (September)
    Pages: 2503-2538

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    Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2503-2538

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. Nain, Amrita & Yao, Tong, 2013. "Mutual fund skill and the performance of corporate acquirers," Journal of Financial Economics, Elsevier, vol. 110(2), pages 437-456.

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