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The Impact of Country Diversification on Wealth Effects in Cross‐Border Mergers
Author(s) -
Kiymaz Halil,
Mukherjee Tarun K.
Publication year - 2000
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2000.tb01413.x
Subject(s) - diversification (marketing strategy) , shareholder , cross country , wealth effect , mergers and acquisitions , economics , monetary economics , international economics , business , finance , corporate governance , monetary policy , marketing
We posit that country diversification via cross‐border mergers creates wealth by providing benefits for firms that are not available to their shareholders. We hypothesize that these benefits are inversely related to the extent of co‐movement in the economies of the bidder's and target's countries. We examine the wealth effects of U.S. targets and bidders involved in cross‐border mergers with firms in other countries during 1982–1991. We show that wealth effects vary, depending on country affiliations of two merging firms, and are inversely related to the degree of economic co‐movement between the two countries.