Value creation and destruction in cross-border acquisitions: an empirical analysis of foreign acquisitions of U.S. firms

Deskripsi

This paper investigates the sources of gains and losses in cross-border acquisitions in light of different motives for undertaking these transactions: synergy-seeking, managerialism and hubris. The data are consistent with the expectation that multiple sources of value creation exist in synergistic cross-border acquisitions: asset sharing, reverse internalization of valuable intangible assets, and financial diversification. Gains accrue to bidder firm shareholders only for the least fungible of these sources of gains, i.e., reverse internalization. For value-destroying acquisitions that are expected to be driven by managerialism, the data are consistent with only one of the sources of value destruction that is examined, i.e. risk reduction. In these acquisitions, the evidence also suggests that the relative size of the target to the bidder mitigates the negative effects of risk reduction. The results underscore the importance of considering the implications of alternative behavioral assumptions in strategy content research.Printed Journal