Cross-border arbitrage and acquirers’ returns in the Eurozone crisis
Julie Ayton and
Journal of Economics and Business, 2018, vol. 95, issue C, 87-102
Using a sample of 1263 European acquisitions over 2004–2012, we show that the performance of cross-border acquisitions is significantly affected by the Eurozone and the euro debt crisis. First, due to financial market integration and the elimination of exchange rate risk, intra-Eurozone acquisitions do not earn any abnormal returns for bidders. Second, as a result of the euro debt crisis and the temporary misvaluation among European countries, acquisitions earn positive abnormal returns only for non-Eurozone companies acquiring Eurozone targets. These abnormal returns are driven by the depreciation of the euro and the use of low-cost capital available to overvalued acquirers.
Keywords: Acquisitions; European union; Eurozone crisis; Cross-border arbitrage; Exchange rate; Mispricing (search for similar items in EconPapers)
JEL-codes: F15 F33 G01 G34 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:95:y:2018:i:c:p:87-102
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