FOREIGN TAKEOVER ACTIVITY IN THE UNITED-STATES AND WEALTH EFFECTS FOR TARGET FIRM SHAREHOLDERS

This study examines the wealth effects to U.S. target firms observed at the announcement of acquisition bids made by foreign and U.S. bidders. We hypothesize that if the market expects foreign bidders to produce superior takeover gains, the announcement-related excess returns of the targets will reflect these gains when competition forces the foreign bidder to share them with the target. We proxy foreign competition by the relative volume of foreign takeovers in the industry of each target, and rind evidence in support of this hypothesis. The evidence supports theories that attribute asset value enhancement to corporate multinationality and increased target benefits from competition in the corporate acquisitions market.