Bidder Value Implications of Cross-Border vs Domestic Acquisitions: A Study of Dutch Firms
Volume 6, Issue 3 Ramadhan H. Wicaksana
Published online: 03 August 2020 Article Views: 30
Abstract
This study investigates the value implications of cross-border and domestic acquisitions that Dutch bidding firms undertake. This study focuses on Dutch firms since the Netherlands is one of the world’s largest sources of cross-border investments, and cross border acquisitions are a prime example. Past literature which focuses on different regions/countries discovered conflicting findings regarding the value implications of cross-border and domestic acquisitions. Some recorded results that pointed towards value creation for cross-border acquisitions, while some found the opposite. This study utilizes the event study methodology to determine whether cross-border and domestic acquisitions create significant value right after the announcement of the acquisition. This is done by testing the significance of the Cumulative Average Abnormal Returns (CAARs) of 62 cases of acquisitions, comprising 31 cross-border and domestic acquisitions, all involving a Dutch bidding firm. The significance tests yielded statistically insignificant results for all the groups of samples. However, the CAARs themselves were positive for the cross border acquisitions and positive but lower for domestic acquisitions. The unexpected results concluded that there is weak support towards the value-creating nature of cross-border acquisitions and that engaging in a domestic acquisition instead also does not guarantee value creation. At the same time, further inspection discovered that the firms’ strategy might also play a role in the Dutch acquisition’s value creation. Managers could attempt to mitigate such risks by taking measures which encourage transparency regarding their goals and intentions about the acquisition, such that potential investors have a greater chance of placing their trust in the firm.
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To Cite this article
Wicaksana, R. H. (2020). Bidder value implications of cross-border vs domestic acquisitions: A study of Dutch firms. International Journal of Business and Administrative Studies, 6(3), 121-135. doi: https://dx.doi.org/10.20469/ijbas.6.10001-3
