Corporate Multinationality and Acquirer Returns

Date

2018-10-15

Advisors

Journal Title

Journal ISSN

ISSN

0001-3072

Volume Title

Publisher

Wiley

Type

Article

Peer reviewed

Yes

Abstract

This paper provides evidence on how corporate multinationality from the perspective of acquiring firms relates to M&A returns. Using multivariate regressions and a large dataset of over 6,000 M&As (both cross-border and domestic) by UK firms during 1987 to 2014, the paper finds multinationality to be associated with significantly higher short-run announcement returns and long-run operating performance. While the multinationality premium (higher M&A returns for multinationals) persists over time, it seems to be restricted to firms with superior resource/managerial capabilities and minimal agency problems. Finally, the multinationality premium appears to be driven by foreign acquisitions into advanced economies. The results are robust to correcting for sample selection bias and controlling for several firm and deal characteristics, as well as accounting for firm-, industry-, and year-fixed effects. Collectively, the findings imply that multinationality could be a source of value creation for acquiring firms, particularly in foreign acquisitions, which tend to be complex, and thereby, require superior managerial capabilities to succeed.

Description

The file attached to this record is the author's final peer reviewed version.

Keywords

Corporate multinationality, Geographic diversification, Multinational corporations, Firm capabilities, M&As, UK

Citation

Agyei-Boapeah, H., Fosu, S. and Ntim, C.G. (2018) Corporate Multinationality and Acquirer Returns. Abacus, forthcoming

Rights

Research Institute

Finance and Banking Research Group (FiBRe)