The international market for corporate control: Evidence from acquisitions of financial firms

This study examines the impact of international acquisitions on the shareholder wealth of both acquiring and acquired firms, and compares it with that of domestic acquisitions. The results indicate significant differences—bidders in domestic acquisitions lose a statistically significant 0.39 percent, while bidders in international acquisitions do not lose, which supports the diversification motive for foreign expansion. Further, in terms of dollar values, unlike their domestic counterparts, international acquisitions are net wealth creating activities and the division of gains between bidders and targets are more equitable. A cross-sectional analysis of the abnormal returns suggests that the extent of controlling interest being acquired and previous presence in the target country both significantly affect the abnormal returns of the bidders and the method of payment significantly affects the abnormal returns for the targets.