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The Effects of Foreign Acquisitions on the Value of Industry Peers

Published online by Cambridge University Press:  22 March 2023

Umit Yilmaz Open the ORCID record for Umit Yilmaz [Opens in a new window]
Umit Yilmaz*
Affiliation:
Georgetown University McDonough School of Business and Ozyegin University Faculty of Business
*
uy7@georgetown.edu
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Abstract

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This article studies how industry peers’ stock prices respond when another firm in the industry is acquired by a foreign firm. The average stock price reactions of industry peers in horizontal foreign acquisitions around deal announcements are significantly negative. Peers’ returns are more negative in growing, less specialized, and competitive industries. Moreover, the negative stock price reactions of industry peers are related to future decreases in their operating performance. Overall, these results suggest that foreign acquisitions have strong competitive effects for the industry peers of U.S. target companies.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 59 , Issue 4 , June 2024 , pp. 1849 - 1885
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

I thank Reena Aggarwal, Sandeep Dahiya, François Derrien (the referee), Isil Erel, Laurent Frésard, Levent Guntay, Jarrad Harford (the editor), Alberto Plazzi, and Philip Valta for insightful discussions and comments. I acknowledge support from the Psaros Center for Financial Markets and Policy at Georgetown University’s McDonough School of Business. All errors are my own.

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