Corporate Multinationality and Acquirer Returns |
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| Authors: | Henry Agyei-Boapeah Samuel Fosu Collins G Ntim |
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| Institution: | 1. Accounting and Finance Group, York Management School, University of York, UK;2. Department of Accounting and Finance, Leicester Castle Business School, De Montfort University, Leicester, UK
University of Birmingham, UK;3. Centre for Research in Accounting, Accountability and Governance, Department of Accounting, Southampton Business School, University of Southampton, Southampton, UK |
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| Abstract: | This paper provides evidence on how corporate multinationality from the perspective of acquiring firms relates to M&A returns. Using multivariate regressions and a large dataset of over 6,000 M&As (both cross-border and domestic) by UK firms during 1987 to 2014, the paper finds multinationality to be associated with significantly higher short-run announcement returns and long-run operating performance. While the multinationality premium (higher M&A returns for multinationals) persists over time, it seems to be restricted to firms with superior resource/managerial capabilities and minimal agency problems. Finally, the multinationality premium appears to be driven by foreign acquisitions into advanced economies. The results are robust to correcting for sample selection bias and controlling for several firm and deal characteristics, as well as accounting for firm-, industry-, and year-fixed effects. Collectively, the findings imply that multinationality could be a source of value creation for acquiring firms, particularly in foreign acquisitions, which tend to be complex, and, thereby, require superior managerial capabilities to succeed. |
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| Keywords: | Corporate multinationality Geographic diversification Firm capabilities M&As Multinational corporations UK |
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