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Determinants of target selection and acquirer returns: Evidence from cross-border acquisitions

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  • Bae, Sung C.
  • Chang, Kiyoung
  • Kim, Doseong

Abstract

We examine cross-border acquisitions of private and public targets by U.S. firms by employing self selection models. We are particularly interested in the roles of country-level liquidity and transparency in cross-border acquisitions. Our results show that a typical acquisition deal of a private target is smaller in size, uses cash less frequently for payment, and involves more high-tech firms than that of a public target. Most importantly, we find that acquiring firms are more likely to buy private targets in lower-transparency countries, but the level of market liquidity in the target firm countries has little effect on the target selection. Furthermore, after accounting for the endogeneity bias associated with target selection, country liquidity is no longer a key determinant of acquirer returns in cross-border acquisitions. Our results are robust to alternative specifications of dependent variable and self selection models.

Suggested Citation

  • Bae, Sung C. & Chang, Kiyoung & Kim, Doseong, 2013. "Determinants of target selection and acquirer returns: Evidence from cross-border acquisitions," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 552-565.
  • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:552-565
    DOI: 10.1016/j.iref.2013.01.009
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    Cited by:

    1. Chen, Li-Yu & Lai, Jung-Ho & Chen, Carl R., 2015. "Multiple directorships and the performance of mergers & acquisitions," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 178-198.
    2. Hu, May & Yang, Jingjing, 2016. "The role of leverage in cross-border mergers and acquisitions," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 170-199.
    3. Lin, Chih-Yung & Ho, Po-Hsin & Shen, Chung-Hua & Wang, Yu-Chun, 2016. "Political connection, government policy, and investor trading: Evidence from an emerging market," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 153-166.
    4. Ding, Haoyuan & Zheng, Huanhuan & Zhu, Chenqi, 2015. "Equity funds in emerging Asia: Does size matter?," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 149-165.
    5. repec:fau:fauart:v:67:y:2017:i:5:p:423-438 is not listed on IDEAS
    6. Clò, Stefano & Fiorio, Carlo V. & Florio, Massimo, 2017. "The targets of state capitalism: evidence from M&A deals," European Journal of Political Economy, Elsevier, vol. 47(C), pages 61-74.

    More about this item

    Keywords

    Private targets; Public targets; Cross-border acquisitions; Liquidity; Transparency;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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