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Uncertain Outcomes of Foreign Investment: Determinants of the Dispersion of Profits After Large Acquisitions

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  • Tung-Jean Lee

    (Government of Singapore)

  • Richard E Caves

    (Harvard University)

Abstract

When U.S. firms make large international acquisitions, the unpredicted component of their profits over the next five years increases with the relative size of the acquired firm, degree of product diversification, and reliance on R&D assets. The unpredicted component declines with the acquirer's size, experience, and previous profits. Transitory and longer-run unpredicted components are distinguished.© 1998 JIBS. Journal of International Business Studies (1998) 29, 563–581

Suggested Citation

  • Tung-Jean Lee & Richard E Caves, 1998. "Uncertain Outcomes of Foreign Investment: Determinants of the Dispersion of Profits After Large Acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 563-581, September.
    • Handle: RePEc:pal:jintbs:v:29:y:1998:i:3:p:563-581
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    Cited by:

    1. Sun, Pengfei & Yuan, Chunhui & Li, Xiaolong & Di, Jia, 2024. "Big data analytics, firm risk and corporate policies: Evidence from China," Research in International Business and Finance, Elsevier, vol. 70(PB).
    2. Kim, Dong-Kyoon, 2004. "The incentive effects of executive stock options: evidence from international acquisitions," Journal of Multinational Financial Management, Elsevier, vol. 14(2), pages 187-200, April.
    3. Keith D. Brouthers & Desislava Dikova, 2010. "Acquisitions and Real Options: The Greenfield Alternative," Journal of Management Studies, Wiley Blackwell, vol. 47(6), pages 1048-1071, September.
    4. Hideki Yamawaki, 2004. "Who Survives in Japan? An Empirical Analysis of European and U.S. Multinational Firms in Japanese Manufacturing Industries," Journal of Industry, Competition and Trade, Springer, vol. 4(2), pages 135-153, June.
    5. von Eije, Henk & Wiegerinck, Hélène, 2010. "Shareholders' reactions to announcements of acquisitions of private firms: Do target and bidder markets make a difference?," International Business Review, Elsevier, vol. 19(4), pages 360-377, August.
    6. Zaiyang Xie & Runhui Lin & Jie Mi & Na Li, 2019. "Improving Enterprises’ Cross-Border M&A Sustainability in the Globalization Age—Research on Acquisition and Application of the Foreign Experience," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    7. Bai, Ye & Girma, Sourafel & Riaño, Alejandro, 2024. "Corporate acquisitions and firm-level uncertainty: Domestic versus cross-border deals," Journal of International Money and Finance, Elsevier, vol. 140(C).
    8. Cheng-Wei Wu & Jeffrey J. Reuer, 2021. "Effects of R&D Investments and Market Signals on International Acquisitions: Evidence from IPO Firms," JRFM, MDPI, vol. 14(5), pages 1-27, April.
    9. Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
    10. Lewis, Yimai & Bozos, Konstantinos, 2019. "Mitigating post-acquisition risk: the interplay of cross-border uncertainties," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    11. Gada, Viswa Prasad & Goyal, Lakshmi & Popli, Manish, 2021. "Earnouts in M&A deal structuring: The impact of CEO prevention focus," Journal of International Management, Elsevier, vol. 27(1).
    12. Christian Falaster & Manuel Portugal Ferreira & Dan Li, 2021. "The influence of generalized and arbitrary institutional inefficiencies on the ownership decision in cross-border acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1724-1749, December.
    13. Nuno Calheiros-Lobo & José Vasconcelos Ferreira & Manuel Au-Yong-Oliveira, 2023. "SME Internationalization and Export Performance: A Systematic Review with Bibliometric Analysis," Sustainability, MDPI, vol. 15(11), pages 1-36, May.
    14. Kim, Yeongsu Anthony & Liang, Feng Helen, 2023. "The effect of CEO prominence on cross-border acquisitions: An international entrepreneurship approach," Journal of Business Research, Elsevier, vol. 163(C).
    15. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2007. "Factors influencing perceptions of performance: The case of western FDI in an emerging market," International Business Review, Elsevier, vol. 16(3), pages 310-336, June.
    16. Ali-Yrkkö, Jyrki, 2002. "Mergers and Acquisitions - Reasons and Results," Discussion Papers 792, The Research Institute of the Finnish Economy.
    17. Juan Bu & Yinuo Tang & Yadong Luo & Chengguang Li, 2023. "Learning from inbound foreign acquisitions for outbound expansion by emerging market MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(5), pages 852-886, July.
    18. Jingjing Li & Xianming Wu, 2022. "Technology-Driven Cross-Border M&A, CSR, and Enterprise Innovation Performance—Evidence from China," Sustainability, MDPI, vol. 14(7), pages 1-32, March.
    19. He, Xuan & Xiao, Weicheng, 2022. "What drives family SMEs to internationalize? An integrated perspective of community institutions and knowledge resources," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    20. Bishal BC & Thuy Simpson, 2023. "How do firms learn? Evidence from corporate cash holdings during the COVID‐19 pandemic," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 77-108, March.
    21. De Beule, Filip & Sels, Annabel, 2016. "Do innovative emerging market cross-border acquirers create more shareholder value? Evidence from India," International Business Review, Elsevier, vol. 25(2), pages 604-617.

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