An analysis of gains and losses to shareholders of foreign bidding companies engaged in cross-border acquisitions into the United Kingdom, 1986-1991

Article English OPEN
Danbolt, J. (1995)

In this paper the gains and losses to shareholders of 71 foreign companies which made takeover bids for companies listed in the United Kingdom during the 1986-1991 period are analysed. The average abnormal return during the month of the bid announcement was positive, although not statistically significant. However, both prior to and sub-sequent to the bid announcement month, the overseas bidders earned highly significant negative abnormal returns. The cumulative abnormal returns over the five month period following the bid announcement were-4.77% with the index model and -9.79% with the market model. Further analysis established that Continental European companies performed significantly worse than American bidders. In addition, large companies and companies bidding for large targets, performed significantly better than the other bidders.
  • References (7)

    Agrawal A, Jaffe J & Mandelker G (1992) The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly, Journal of Finance, XLVII, 1605-1621.

    Asquith P (1983) Merger Bids, Uncertainty, and Stockholder Returns, Journal of Financial Economics, 11, 51-83.

    Asquith P, Bruner R & Mullins D (1983) The Gains to Bidding Firms from Merger, Journal of Financial Economics, 11, 121-139.

    Ball R, Kothari S & Watts R (1993) Economic Determinants of the Relation Between Earnings Changes and Stock Returns, The Accounting Review, 68, 622-638.

    Bernard V & Thomas J (1989) Post-Earnings Announcement Drift: Delayed Price response or Risk Premium?, Journal of Accounting Research, 17, Supplement, 1-36.

    Manzon G, Sharp D & Travlos N (1994) An Empirical Study of the Consequences of U.S. Tax Rules for International Acquisitions by U.S. Firms, Journal of Finance, XLIX, 1893-1904.

    Shaked I, Michel A & McClain D (1991) The Foreign Acquirer Bonanza: Myth or Reality?, Journal of Business Finance & Accounting, 18, 431-447.

  • Metrics
    No metrics available
Share - Bookmark