Acquiring foreign firms far away might be hazardous to your share price: evidence from Germany

Michael Grote and Fabian Rücker

No 182, Working Paper Series: Finance and Accounting from Department of Finance, Goethe University Frankfurt am Main

Abstract: This paper examines shareholder wealth effects of cross-border acquisitions. In a sample of 155 large acquisitions by German corporations from 1985–2006 international transactions in total do not lead to significant announcement returns. Geography, however, makes a difference: Shareholders of acquiring firms gain 6.5% in cross-border transactions into countries that have a common border with Germany but lose 4.4% in other international transactions. We find proximity to be one of the most important success factors in cross-border mergers and acquisitions, even when we control for firm, deal and country characteristics.

Date: 2007-08
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