Shareholder Wealth Effects of Cross-border Mergers and Acquisitions: Empirical Evidence from European Bidders


While cross-border mergers and acquisitions (M&As) have accelerated over time, the understanding of whether it can create or destroy shareholder wealth is limited. The relationship between firm’s legal origin and shareholder return in M&A is also worth investigating. This paper investigates the impact of cross-border M&As on shareholder return in acquiring firms and examines the effect of firm’s legal origin on shareholder wealth in a context of M&As. Further, it explores the determinants of bidders’ return in cross-border M&As, which is more complex than domestic M&As. In this research, a sample of 616 cross-border M&A transactions made by European listed acquiring companies from both the UK (243 deals) and Continental European (CE) countries (373 deals) based on different legal systems of them, with target firms both public and private worldwide, during 2004-2013 is used to examine the stock market performance, based on an event study methodology. The determinants of bidders’ return are explored by a cross-sectional analysis. The result shows that European bidders receive on average a significant positive cumulative abnormal return around the cross-border M&A announcements and there is no significant difference in shareholder wealth between the UK and CE acquiring firms who belong to different legal systems during M&A announcements. Further, the evidence shows that factors including relative size of the target, public status of target firm both affect bidders’ return in cross-border M&As. Moreover, macroeconomic condition difference and legal or corporate governance environment difference between countries of two firms also have explanatory power in influencing bidder’s gains in cross-border M&As. Moreover, these factors can better explain wealth gains to CE bidders than that for the UK bidders

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    This paper was published in Nottingham ePrints.

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