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Cherry Picking versus Lemon Grabbing: Target Selection of Cross-Border and Domestic Acquisitions in Japan

Ralf Bebenroth and Pao-Lien Chen
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Pao-Lien Chen: Institute of Technology Management National Tsing Hua University

No DP2018-13, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper investigates whether foreign firms overtake better local targets relative to domestic firms. Building on the geographic proximity and the value creation argument, we make predictions about whether domestic or foreign firms "cherry pick" the targets or "grab lemons". Our findings from a sample of local targets in Japan acquired by domestic and cross domestic acquirers show that both groups cherry-pick local targets, but they evaluate them differently. Targets with a better financial performance are more likely overtaken by domestic acquirers whereas those with a larger employee or market size are more likely overtaken by foreign acquirers.

Keywords: Cross-border acquisitions; Target selection; Cherry-picking; Geographic proximity; Value creation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-int
Date: 2018-05
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