Gains to Bidder Firms Revisited: Domestic and Foreign Acquisitions in Canada

We present large sample evidence on the performance of domestic and U.S. (foreign) bidder firms acquiring Canadian targets. Domestic bidders earn significantly positive average announcement period abnormal returns, while U.S. bidder returns are indistinguishable from zero. Measures of pre- and post-acquisition abnormal accounting performance are also consistent with a superior domestic bidder performance. Domestic bidder announcement returns are, on average, greatest for offers involving stock payment and for the bidders with the smallest equity size relative to the target. Neither direct foreign investment controls, horizontal product market relationships, nor acquisition propensities explain why domestic bidders outperform their U.S. competitors.

[1]  F. Scherer,et al.  The profitability of mergers , 1989 .

[2]  Rex Thompson,et al.  Evidence on the capitalized value of merger activity for acquiring firms , 1983 .

[3]  Rex Thompson,et al.  Partially anticipated events: A model of stock price reactions with an application to corporate acquisitions , 1985 .

[4]  Robert F. Bruner,et al.  The gains to bidding firms from merger , 1983 .

[5]  Richard S. Ruback,et al.  The Market for Corporate Control: The Scientific Evidence , 2002 .

[6]  Vojislav Maksimovic,et al.  Consistent Estimation of Cross-Sectional Models in Event Studies , 1990 .

[7]  B. Eckbo.  Mergers and the Market for Corporate Control: The Canadian Evidence , 1986 .

[8]  Robert S. Harris,et al.  Means of Payment in Takeovers: Results for the U.K. And U.S , 1987 .

[9]  A. Auerbach,et al.  Corporate Takeovers: Causes and Consequences , 1988 .

[10]  Frederic M. Scherer,et al.  Life after Takeover , 1987 .

[11]  R. Roll,et al.  The Hubris Hypothesis of Corporate Takeovers , 1986 .

[12]  B. Eckbo,et al.  Information Disclosure, Method of Payment, and Takeover Premiums: Public and Private Tender Offers in France , 1989 .

[13]  Michael C. Jensen,et al.  The market for corporate control , 1983 .

[14]  N. Travlos,et al.  Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns , 1987 .

[15]  G. William Schwert,et al.  Markup Pricing in Mergers and Acquisitions , 1996 .

[16]  A. Goldberger.  A course in econometrics , 1991 .

[17]  James A. Brickley,et al.  The Market for Corporate Control: The Empirical Evidence Since 1980 , 1988 .

[18]  Robert S. Harris,et al.  An Empirical Analysis of the Role of the Medium of Exchange in Mergers , 1983 .

[19]  Kenneth J. Martin,et al.  Corporate acquisitions by listed firms: the experience of a comprehensive sample , 1990 .

[20]  G. Jarrell,et al.  The Economic Effects of Federal and State Regulations of Cash Tender Offers , 1980, The Journal of Law and Economics.

[21]  Annette B. Poulsen,et al.  The Returns to Acquiring Firms in Tender Offers: Evidence from Three Decades , 1989 .

[22]  B. Eckbo,et al.  Toeholds, Bid Jumps, and Expected Payoffs in Takeovers , 2000 .

[23]  S. Clarkson.  Canada and the Reagan Challenge , 1982 .

[24]  Ralph A. Walkling,et al.  Abnormal Returns to Rivals of Acquisition Targets: A Test of the Acquisition Probability Hypothesis , 2000 .

[25]  L. Lowenstein,et al.  Knights, Raiders, and Targets: The Impact of the Hostile Takeover , 1990 .

[26]  H. Theil.  Principles of econometrics , 1971 .

[27]  Michael J. Fishman.  Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions , 1989 .

[28]  B. Eckbo,et al.  Asymmetric Information and the Medium of Exchange in Takeovers: Theory and Tests , 1990 .

[29]  Yen-Sheng Huang,et al.  Target Abnormal Returns Associated with Acquisition Announcements: Payment, Acquisition Form, and Managerial Resistance , 1987 .

[30]  B. Eckbo,et al.  Mergers and the Value of Antitrust Deterrence , 1992 .

[31]  R. Hansen,et al.  A Theory for the Choice of Exchange Medium in Mergers and Acquisitions , 1987 .

[32]  Canada.,et al.  Foreign direct investment in Canada , 1972 .