Are Japanese Acquisitions Efficient Investments?

This study empirically examines whether mergers and acquisitions (M&As) by Japanese firms have positive wealth effects for the shareholders of the acquiring firms. We tested stock price performance at both the time of the initial announcement and the post-announcement period for 658 domestic and 73 cross-border control acquisitions announced in the period 2003 to 2010. The results indicate that M&As by Japanese firms enhance shareholder wealth. The wealth effects associated with acquisitions are mostly reflected at the time of the initial announcement, and are larger in cross-border acquisitions targeting developing countries and in acquisitions achieving full control of targets. We also show that a larger synergy is realized in horizontal acquisitions with full control of target firms. We provide evidence that acquisitions by Japanese firms are efficient investments, and that the stock market efficiently reflects this.