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An analysis of gains and losses to shareholders of foreign bidding companies engaged in cross-border acquisitions into the United Kingdom, 1986-1991

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  • Jo Danbolt

Abstract

In this paper the gains and losses to shareholders of 71 foreign companies which made takeover bids for companies listed in the United Kingdom during the 1986-1991 period are analysed. The average abnormal return during the month of the bid announcement was positive, although not statistically significant. However, both prior to and sub-sequent to the bid announcement month, the overseas bidders earned highly significant negative abnormal returns. The cumulative abnormal returns over the five month period following the bid announcement were-4.77% with the index model and -9.79% with the market model. Further analysis established that Continental European companies performed significantly worse than American bidders. In addition, large companies and companies bidding for large targets, performed significantly better than the other bidders.

Suggested Citation

  • Jo Danbolt, 1995. "An analysis of gains and losses to shareholders of foreign bidding companies engaged in cross-border acquisitions into the United Kingdom, 1986-1991," The European Journal of Finance, Taylor & Francis Journals, vol. 1(3), pages 279-309.
    • Handle: RePEc:taf:eurjfi:v:1:y:1995:i:3:p:279-309
    DOI: 10.1080/13518479500000021
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    1. Mateev, Miroslav & Andonov, Kristiyan, 2016. "Do cross-border and domestic bidding firms perform differently? New evidence from continental Europe and the UK," Research in International Business and Finance, Elsevier, vol. 37(C), pages 327-349.
    2. Robert L Conn & Andy Cosh & Paul M Guest & Alan Hughes, 2003. "The Impact on U.K. Acquirers of Domestic, Cross-border, Public and Private Acquisitions," Working Papers wp276, Centre for Business Research, University of Cambridge.
    3. Ervin L. Black & Thomas A. Carnes & Tomas Jandik & B. Charlene Henderson, 2007. "The Relevance of Target Accounting Quality to the Long‐Term Success of Cross‐Border Mergers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1‐2), pages 139-168, January.
    4. Robert L. Conn & Andy Cosh & Paul M. Guest & Alan Hughes, 2005. "The Impact on UK Acquirers of Domestic, Cross‐border, Public and Private Acquisitions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5‐6), pages 815-870, June.
    5. McCahery, J.A. & Renneboog, L.D.R., 2003. "The Economics of the Proposed European Takeover Directive," Other publications TiSEM b16fdfd0-9e4e-44bb-b20f-f, Tilburg University, School of Economics and Management.
    6. Andriosopoulos, Dimitris & Yang, Shuai & Li, Wei-an, 2016. "The market valuation of M&A announcements in the United Kingdom," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 350-366.
    7. C Conn & A Cosh & P Guest & A Hughes, 2001. "Long-Run Share Performance of UK Firms Engaging in Cross-Border Acquisitions," Working Papers wp214, Centre for Business Research, University of Cambridge.
    8. Gregory, Alan & O'Donohoe, Sheila, 2014. "Do cross border and domestic acquisitions differ? Evidence from the acquisition of UK targets," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 61-69.
    9. Pandey, Vivek & Steigner, Tanja & Sutton, Ninon K., 2023. "The value of economic freedom in cross-border mergers," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 540-563.

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