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

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  • Jun-Koo Kang

    (Michigan State University)

  • Jin-Mo Kim

    (University of Missouri–Kansas City)

  • Wei-Lin Liu

    (Michigan State University)

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.

Suggested Citation

  • Jun-Koo Kang & Jin-Mo Kim & Wei-Lin Liu, 2006. "Post-takeover Restructuring and the Sources of Gains in Foreign Takeovers: Evidence from U.S. Targets," The Journal of Business, University of Chicago Press, vol. 79(5), pages 2503-2538, September.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2503-2538
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    File URL: http://dx.doi.org/10.1086/505242
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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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