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Acquiring foreign firms far away might be hazardous to your share price: evidence from Germany

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  • Michael H. Grote

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  • Fabian Rücker

Abstract

This paper examines shareholder wealth effects of cross-border acquisitions. In a sample of 155 large acquisitions by German corporations from 1985–2006 international transactions in total do not lead to significant announcement returns. Geography, however, makes a difference: Shareholders of acquiring firms gain 6.5% in cross-border transactions into countries that have a common border with Germany but lose 4.4% in other international transactions. We find proximity to be one of the most important success factors in cross-border mergers and acquisitions, even when we control for firm, deal and country characteristics.

Suggested Citation

  • Michael H. Grote & Fabian Rücker, 2007. "Acquiring foreign firms far away might be hazardous to your share price: evidence from Germany," Working Paper Series: Finance and Accounting 182, Department of Finance, Goethe University Frankfurt am Main.
  • Handle: RePEc:fra:franaf:182
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    File URL: http://www.finance.uni-frankfurt.de/wp/1525.pdf
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    Cited by:

    1. Di Guardo, Maria Chiara & Marrocu, Emanuela & Paci, Raffaele, 2016. "The effect of local corruption on ownership strategy in cross-border mergers and acquisitions," Journal of Business Research, Elsevier, vol. 69(10), pages 4225-4241.
    2. repec:spr:manint:v:49:y:2009:i:4:d:10.1007_s11575-009-0006-7 is not listed on IDEAS

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