Cross-border transactions, mergers and the inconsistency of international reference points

Garrett C. Smith, Jeffrey M. Coy and Andrew C. Spieler

Journal of Behavioral and Experimental Finance, 2019, vol. 22, issue C, 14-21

Abstract: Reference point theory is a well-established phenomenon in the behavioral economics field (Anchoring Theory). Its broad implications also extend to financial topics. For example, Baker et al. (2012) demonstrate the impact of a range of reference points related to 52-week high stock price on domestic merger and acquisition activity. The anchoring behavioral bias is universal and not limited to the United States. An investigation into the power and impact of reference points in explaining merger and acquisition activity in an international setting is valuable as firms face heterogeneous legal, regulatory, and market conditions. In addition, cross-border mergers change the legal structure of the shares of the target firm. Using the 52-week high share price of the target, this study investigates the impact of increased information asymmetry in estimating synergistic effects.

Keywords: Reference point; Cross-border; Mergers and acquisitions; Offer price (search for similar items in EconPapers)
JEL-codes: G15 G23 G31 G34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:22:y:2019:i:c:p:14-21

DOI: 10.1016/j.jbef.2019.01.001

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