Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-26T09:05:29.617Z Has data issue: false hasContentIssue false
  • English
  • Français

Gains to Bidder Firms Revisited: Domestic and Foreign Acquisitions in Canada

Published online by Cambridge University Press:  06 April 2009

B. Espen Eckbo  and
Karin S. Thorburn
Get access Rights & Permissions [Opens in a new window]

Abstract

We present large sample evidence on the performance of domestic and U.S. (foreign) bidder firms acquiring Canadian targets. Domestic bidders earn significantly positive average announcement period abnormal returns, while U.S. bidder returns are indistinguishable from zero. Measures of pre- and post-acquisition abnormal accounting performance are also consistent with a superior domestic bidder performance. Domestic bidder announcement returns are, on average, greatest for offers involving stock payment and for the bidders with the smallest equity size relative to the target. Neither direct foreign investment controls, horizontal product market relationships, nor acquisition propensities explain why domestic bidders outperform their U.S. competitors.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 35 , Issue 1 , March 2000 , pp. 1 - 25
Copyright
Copyright © School of Business Administration, University of Washington 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

Both authors, Amos Tuck School of Business Administration, Dartmouth College, Hanover, NH 03755. The authors are grateful for comments from Jonathan Karpoff, Øyvind Norli, Antonio Mello, and, especially, Paul Malatesta (the editor).

References

Asquith, P.; Bruner, R. F.; and Mullins, D. W. Jr, “The Gains to Bidding Firms from Merger.” Journal of Financial Economics, 11 (1983), 121–139.10.1016/0304-405X(83)90007-7CrossRefGoogle Scholar
Betton, S., and Eckbo, B. E.. “Toeholds, Bid-Jumps, and Expected Payoffs in Takeovers.” Review of Financial Studies (forthcoming 2000).CrossRefGoogle Scholar
Carleton, W. T.; Guilkey, A. K.; Harris, R. S.; and Stewart, J. F.. “An Empirical Analysis of the Role of the Medium of Exchange in Mergers.” Journal of Finance, 38 (1983), 813–826.10.2307/2328083CrossRefGoogle Scholar
Clarkson, S. Canada and the Reagan Challenge. Toronto: James Lorimer ' Co. (1982).Google Scholar
Eckbo, B. E “Mergers and the Market for Corporate Control: The Canadian Evidence.” Canadian Journal of Economics, 19 (1986), 236–260.10.2307/135282CrossRefGoogle Scholar
Eckbo, B. E “Mergers and the Value of Antitrust Deterrence.” Journal of Finance, 47 (1992), 1005–1029.10.2307/2328975CrossRefGoogle Scholar
Eckbo, B. E.; Giammarino, R. M.; and Heinkel, R. L.. “Asymmetric Information and the Medium of Exchange in Takeovers.” Review of Financial Studies, 3 (1990), 651–676.10.1093/rfs/3.4.651CrossRefGoogle Scholar
Eckbo, B. E., and Langohr, H.. “Information Disclosure, Method of Payment, and Takeover Premiums: Public and Private Tender Offers in France.” Journal of Financial Economics, 24 (1989), 363–403.10.1016/0304-405X(89)90052-4CrossRefGoogle Scholar
Eckbo, B. E.; Maksimovic, V.; and Williams, J.. “Consistent Estimation of Cross-Sectional Models in Event Studies.” Review of Financial Studies, 3 (1990), 343–365.10.1093/rfs/3.3.343CrossRefGoogle Scholar
Eckbo, B. E., and Masulis, R. W.. “Seasoned Public Offerings: A Survey.” In Finance, Series of Handbooks in Operations Research and Management Science, vol. 9, Jarrow, R. A., Maksimovic, V., and Ziemba, W. T., eds. Holland: North-Holland (1995), 1017–1072.Google Scholar
Eckbo, B. E., and Verma, S.. “Voting Power and Valuation Effects of Security Offerings.” Working Paper, Dartmouth College (1992).Google Scholar
Fishman, M. J. “Preemptive Bidding and the Role of the Medium of Exchange.” Journal of Finance, 44 (1989), 41–58.10.2307/2328274CrossRefGoogle Scholar
Franks, J. R.; Harris, R. S.; and Mayer, C.. “Means of Payment in Takeovers: Results for the U.K. and the U.S.” In Corporate Takeovers: Causes and Consequences, Auerback, A., ed. NBER, Chicago, IL: Univ. of Chicago Press (1988).Google Scholar
Gilson, R. J.; Scholes, M. S.; and Wolfson, M. A.. “Taxation and the Dynamics of Corporate Control: The Uncertain Case for Tax-Motivated Acquisitions.” In Knights, Raiders and Targets: The Impact of the Hostile Takeover, Coffee, J. C. Jr,; Lowenstein, L.; and Rose-Ackerman, S., eds. New York, NY: Oxford Univ. Press (1988).Google Scholar
Gray, H. Foreign Direct Investment in Canada. Government of Canada (1972).Google Scholar
Hansen, R. “A Theory for the Choice of Exchange Medium in Mergers and Acquisitions.” Journal of Business, 60 (1987), 75–95.10.1086/296386CrossRefGoogle Scholar
Hirshleifer, D. “Mergers and Acquisitions: Strategic and Informational Issues.” In Finance, Handbooks in Operations Research and Management Science, vol. 9, Jarrow, R. A., Maksimovic, V., and Ziemba, W. T., eds. Holland: North-Holland (1995), 839–885.Google Scholar
Huang, R., and Walkling, R.. “Target Abnormal Returns Associated with Acquisition Announcements: Payment, Acquisition Form and Managerial Resistance. Journal of Financial Economics, 19 (1987), 329–350.10.1016/0304-405X(87)90008-0CrossRefGoogle Scholar
Jarrell, G. A., and Bradley, M.. “The Economic Effects of Federal and State Regulations of Cash Tender Offers.” Journal of Law and Economics, (1980), 371–407.CrossRefGoogle Scholar
Jarrell, G. A.; Brickley, J. A.; and Netter, J. M.. “The Market for Corporate Control: The Empirical Evidence Since 1980.” Journal of Economic Perspectives, 2 (1988), 49–68.10.1257/jep.2.1.49CrossRefGoogle Scholar
Jarrell, G. A., and Poulsen, A. B.. “The Returns to Acquiring Firms in Tender Offers: Evidence from Three Decades.” Financial Management, 18 (1989), 12–19.10.2307/3665645CrossRefGoogle Scholar
Jensen, M. C., and Ruback, R. S.. “The Market for Corporate Control: The Scientific Evidence.” Journal of Financial Economics, 11 (1983), 5–50.10.1016/0304-405X(83)90004-1CrossRefGoogle Scholar
Loderer, C., and Martin, K.. “Corporate Acquisitions by Listed Firms: The Experience of a Comprehensive Sample.” Financial Management, 19 (1990), 17–33.10.2307/3665607CrossRefGoogle Scholar
Malatesta, P. H., and Thompson, R.. “Partially Anticipated Events: A Model of Stock Price Reactions with an Application to Corporate Acquisitions.” Journal of Financial Economics, 14 (1985), 237–250.10.1016/0304-405X(85)90016-9CrossRefGoogle Scholar
Malatesta, P. H. “Stock Price Reactions to Partially Anticipated Events: Evidence on the Economic Impact of Corporate Acquisition Attempts.” Research in Finance, 6 (1986), 119–148.Google Scholar
Myers, S. C., and Majluf, N. S.. “Corporate Financing and Investment Decisions when Firms Have Information Investors Do Not Have.” Journal of Financial Economics, 13 (1984), 197–221.10.1016/0304-405X(84)90023-0CrossRefGoogle Scholar
Ravenscraft, D., and Scherer, F. M.. “Life after Takeover.” Journal of Industrial Economics, 36 (1987), 147–157.10.2307/2098409CrossRefGoogle Scholar
Ravenscraft, D. “The Profitability of Mergers.” International Journal of Industrial Organization, 7 (1989), 101–117.10.1016/0167-7187(89)90048-9CrossRefGoogle Scholar
Roll, R. “The Hubris Hypothesis of Corporate Takeovers.” Journal of Business, 59 (1986), 197–216.10.1086/296325CrossRefGoogle Scholar
Schipper, K., and Thompson, R.. “Evidence on the Capitalized Value of Merger Activity for Acquiring Firms.” Journal of Financial Economics, 11 (1983), 85–119.10.1016/0304-405X(83)90006-5CrossRefGoogle Scholar
Schwert, G. W. “Markup Pricing in Mergers and Acquisitions.” Journal of Financial Economics, 41 (1996), 153–192.10.1016/0304-405X(95)00865-CCrossRefGoogle Scholar
Song, M. H., and Walkling, R. A. “Abnormal Returns to Rivals of Acquisition Targets: A Test of the Acquisition Probability Hypothesis, Working Paper, Ohio State Univ. (1998).Google Scholar
Theil, H. Principles of Econometrics. New York, NY: John Wiley (1971).Google Scholar
Travlos, N. “Corporate Takeover Bids, Method of Payment and Bidding Firms' Stock Returns.” Journal of Finance, 45 (1987), 943–964.10.2307/2328300CrossRefGoogle Scholar