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Japanese firms' overpayments for cross‐border acquisitions

Ralf Bebenroth and Kashif Ahmed

International Finance, 2021, vol. 24, issue 2, 257-273

Abstract: U.S. and European research suggests that firms tend to overpay when acquiring cross‐border targets. Our research focuses on an Asian setting. We find that Japanese acquirers pay significantly higher premiums for cross‐border targets than for domestic ones. We also find that, in the case of acquisitions of domestic firms, acquirers that are laden with debt or that have higher market‐to‐book ratios (which signals their attractiveness) pay lower premiums. By contrast, we find that in the case of cross‐border acquisitions, neither variable has a significant impact on premiums, which suggests that premiums are not set efficiently for cross‐border acquisitions.

Date: 2021
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