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Corporate multinationality and acquirer returns

Corporate multinationality and acquirer returns
Corporate multinationality and acquirer returns
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.
Corporate multinationality, Geographic diversification, Multinational corporations, Firm capabilities, M&As, UK
0001-3072
1-38
Agyei-Boapeah, Henry
97da4bfc-659e-43a7-b110-f5635ea2456f
Fosu, Samuel
20135acd-447a-44ab-b5c7-949477e89121
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Agyei-Boapeah, Henry
97da4bfc-659e-43a7-b110-f5635ea2456f
Fosu, Samuel
20135acd-447a-44ab-b5c7-949477e89121
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b

Agyei-Boapeah, Henry, Fosu, Samuel and Ntim, Collins (2019) Corporate multinationality and acquirer returns. Abacus, 1-38. (doi:10.1111/abac.12146).

Record type: Article

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.

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Accepted Abacus 4 October 2018 manuscript - Accepted Manuscript
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More information

Accepted/In Press date: 4 October 2018
e-pub ahead of print date: 8 January 2019
Keywords: Corporate multinationality, Geographic diversification, Multinational corporations, Firm capabilities, M&As, UK

Identifiers

Local EPrints ID: 424926
URI: https://eprints.soton.ac.uk/id/eprint/424926
ISSN: 0001-3072
PURE UUID: e9905099-1c8f-4c6d-b5a1-70cd539b8bc4
ORCID for Collins Ntim: ORCID iD orcid.org/0000-0002-1042-4056

Catalogue record

Date deposited: 05 Oct 2018 16:30
Last modified: 20 Jul 2019 01:33

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Contributors

Author: Henry Agyei-Boapeah
Author: Samuel Fosu
Author: Collins Ntim ORCID iD

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