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Cross-border arbitrage and acquirers’ returns in the Eurozone crisis

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  • Ayton, Julie
  • Rao-Nicholson, Rekha

Abstract

Using a sample of 1263 European acquisitions over 2004–2012, we show that the performance of cross-border acquisitions is significantly affected by the Eurozone and the euro debt crisis. First, due to financial market integration and the elimination of exchange rate risk, intra-Eurozone acquisitions do not earn any abnormal returns for bidders. Second, as a result of the euro debt crisis and the temporary misvaluation among European countries, acquisitions earn positive abnormal returns only for non-Eurozone companies acquiring Eurozone targets. These abnormal returns are driven by the depreciation of the euro and the use of low-cost capital available to overvalued acquirers.

Suggested Citation

  • Ayton, Julie & Rao-Nicholson, Rekha, 2018. "Cross-border arbitrage and acquirers’ returns in the Eurozone crisis," Journal of Economics and Business, Elsevier, vol. 95(C), pages 87-102.
  • Handle: RePEc:eee:jebusi:v:95:y:2018:i:c:p:87-102
    DOI: 10.1016/j.jeconbus.2017.05.001
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    More about this item

    Keywords

    Acquisitions; European union; Eurozone crisis; Cross-border arbitrage; Exchange rate; Mispricing;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G01 - Financial Economics - - General - - - Financial Crises
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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