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Corporate Acquisitions and Firm-level Uncertainty: Domestic versus Cross-Border Deals

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  • Bai, Y.
  • Girma, S.
  • Riaño, A.

Abstract

This paper studies the impact of corporate acquisitions on the uncertainty faced by acquiring firms. We use data for UK public companies from 2004 to 2017 and employ a matching estimator combined with difference-in-differences to control for the endogenous selection of firms into acquiring status. Acquisitions exert a large and persistent effect on the volatility of stock returns of acquirers and is characterized by a pecking order: domestic takeovers lead to a reduction in the uncertainty faced by the acquirer, while cross-border acquisitions|particularly those involving target firms in emerging markets|engender a positive response in acquirers' volatility.

Suggested Citation

  • Bai, Y. & Girma, S. & Riaño, A., 2020. "Corporate Acquisitions and Firm-level Uncertainty: Domestic versus Cross-Border Deals," Working Papers 20/09, Department of Economics, City University London.
    • Handle: RePEc:cty:dpaper:20/09
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    More about this item

    Keywords

    Mergers and Acquisitions; Uncertainty; Volatility; Globalization; Stock Returns; UK;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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