The Difference between the Returns to Shareholders of UK Acquirers Involved in Domestic and Cross-border Mergers and Acquisitions

Abstract

This paper examines the difference between the reaction of the market to the announcement of domestic and cross-border mergers and acquisitions by focusing on the returns to acquirers’ shareholders around the announcement date. Based on a sample of 585 domestic and foreign acquisitions made by UK public acquirers over the period 1996-2003, and after applying the event study methodology using three benchmark methods which are the mean-adjusted method, the market model method and the market-adjusted method; the results in general show significant positive returns to shareholders in domestic mergers and acquisitions whereas insignificant negative abnormal returns to shareholders in cross-border mergers and acquisitions. Overall, cross-border acquisitions result in lower announcement returns than domestic acquisitions