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Are Japanese Acquisitions Efficient Investments?

  • INOUE Kotaro
  • NARA Saori
  • YAMASAKI Takashi
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    This study empirically examines whether mergers and acquisitions (M&As) by Japanese firms have positive wealth effects for the shareholders of the acquiring firms. We tested stock price performance at both the time of the initial announcement and the post-announcement period for 658 domestic and 73 cross-border control acquisitions announced in the period 2003 to 2010. The results indicate that M&As by Japanese firms enhance shareholder wealth. The wealth effects associated with acquisitions are mostly reflected at the time of the initial announcement, and are larger in cross-border acquisitions targeting developing countries and in acquisitions achieving full control of targets. We also show that a larger synergy is realized in horizontal acquisitions with full control of target firms. We provide evidence that acquisitions by Japanese firms are efficient investments, and that the stock market efficiently reflects this.

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    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13085.

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    Length: 50 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:eti:dpaper:13085
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    1. Rossi, Stefano & Volpin, Paolo, 2003. "Cross-Country Determinants of Mergers and Acquisitions," CEPR Discussion Papers 3889, C.E.P.R. Discussion Papers.
    2. Eugene F. Fama, . "Market Efficiency, Long-term Returns, and Behavioral Finance," CRSP working papers 340, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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    4. Mark L. Mitchell & Erik Stafford, 1997. "Managerial Decisions and Long-Term Stock Price Performance," CRSP working papers 453, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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    6. Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
    7. Andrei Shleifer & Robert W. Vishny, 2001. "Stock Market Driven Acquisitions," NBER Working Papers 8439, National Bureau of Economic Research, Inc.
    8. Agrawal, Anup & Jaffe, Jeffrey F & Mandelker, Gershon N, 1992. " The Post-merger Performance of Acquiring Firms: A Re-examination of an Anomaly," Journal of Finance, American Finance Association, vol. 47(4), pages 1605-21, September.
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    11. HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2009. "Mergers, Innovation, and Productivity: Evidence from Japanese manufacturing firms," Discussion papers 09017, Research Institute of Economy, Trade and Industry (RIETI).
    12. Moeller, Sara B. & Schlingemann, Frederik P., 2005. "Global diversification and bidder gains: A comparison between cross-border and domestic acquisitions," Journal of Banking & Finance, Elsevier, vol. 29(3), pages 533-564, March.
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    17. repec:dgr:kubcen:2006111 is not listed on IDEAS
    18. Goergen, M. & Renneboog, L.D.R., 2002. "Shareholder Wealth Effects of European Domestic and Cross-Border Takeover Bids," Discussion Paper 2002-50, Tilburg University, Center for Economic Research.
    19. "Iwatsubo, Kentaro" & "Tonogi, Konomi", 2007. "Foreign Ownership and Firm Value―Identification through Heteroskedasticity―," Economic Review, Hitotsubashi University, vol. 58(1), pages 47-60, January.
    20. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March.
    21. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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