European Financial and Accounting Journal 2018, 13(2):59-84 | DOI: 10.18267/j.efaj.210

Home vs. Cross-Border Takeovers: Is There Any Difference in Investor Perception?

ATM Adnan

Bangor University, Bangor Business School, College of Business, Law, Education and Social Sciences, Bangor University, Bangor, Gwynedd, LL57 2DG, Wales, UK.

This paper attempts to portray the empirical difference in investors' perception towards the cross-border and domestic merger and acquisition (M&A) announcements of UK acquirer firms reflected through the significant abnormal stock return. The researcher conducts a short-run event study on the daily stock return of 100 UK bidding firms (50 involved in domestic and 50 involved in cross-border M&As between 2015 and 2016) to compare any significant abnormal returns (AAR and CAAR) around the event announcement period. National and international mergers and acquisitions have witnessed a considerable expansion globally, with the United Kingdom being one of the pioneers in the worldwide market for corporate domination. Research results exhibit that in domestic M&A bidding, firms experience a significant positive announcement return (CAAR) in the event window (t1 ̶ t0) redolent to the positive expectation of investors from the M&A transaction. However, the post-announcement negative return concurrently proves the initial overreaction of investors and the semi-efficient market hypothesis. Foreign M&As result in an insignificant positive return (CAAR) in all the three event windows. There was existence of a positive trend in the cross-border pre-event return (AAR) indicative of narrow possibilities of insider trading or investors' optimistic anticipation, but this is not significantly conclusive.

Keywords: Mergers and Acquisitions, Cross-border, Domestic, Shareholders, Abnormal return

JEL classification: G14, G34

Published: September 1, 2018  Show citation