Financial market integration and the value of global diversification : evidence for US acquirers in cross-border mergers and acquisitions
Francis, Bill B.; Hasan, Iftekhar; Sun, Xian (08.08.2006)
Numero
24/2006Julkaisija
Suomen Pankki
2006
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-20140807307Tiivistelmä
Using theories of internal capital markets, this paper examines the link between financial market integration and the value of global diversification.Based on a sample of 1,491 completed cross-border mergers and acquisitions (M&As) conducted by US acquirers during the 1990-2003 period, we find that, in general, US shareholders gain significant positive abnormal returns following the announcement of the merger/acquisition.Specifically, firms that acquire/merge with targets from countries with financially segmented markets experience significantly higher positive abnormal returns than those that acquire/merge with targets from countries with financially integrated capital markets.We find that the significantly higher positive returns are driven particularly by deals between firms from unrelated industries.These firms with higher announcement returns are also characterized by positive and significant post-merger operating performance.This finding is consistent with our event study results and suggests that the overall improvement in the merged firms' performance is likely due to the influx of internal capital from wholly integrated acquirers to segmented targets, firms that, on average are usually faced with higher capital constraints. Keywords: financial market integration, global diversification, internal capital markets, mergers, acquisitions JEL classification numbers: G15, G31, G34
Julkaisuhuomautus
Julkaisun kansilehdellä nimi Xian Sun on muodossa Zian Sun.
Published in Journal of Banking & Finance, Volume 32, Issue 8, August 2008, pp. 1522-1540.
Published in Journal of Banking & Finance, Volume 32, Issue 8, August 2008, pp. 1522-1540.