Research Discussion Papers, Bank of Finland
No 24/2006:
Financial market integration and the value of global diversification: evidence from US acquirers in cross-border mergers and acquisitions
Bill B Francis, Iftekhar Hasan ()
and Xian Sun
Abstract: Using theories of internal capital markets, this paper
examines the link between financial market integration and the value of
global diversification. Based on a sample of 1,491 completed cross-border
mergers and acquisitions (M&As) conducted by US acquirers during the
1990–2003 period, we find that, in general, US shareholders gain
significant positive abnormal returns following the announcement of the
merger/acquisition. Specifically, firms that acquire/merge with targets
from countries with financially segmented markets experience significantly
higher positive abnormal returns than those that acquire/merge with targets
from countries with financially integrated capital markets. We find that
the significantly higher positive returns are driven particularly by deals
between firms from unrelated industries. These firms with higher
announcement returns are also characterized by positive and significant
post-merger operating performance. This finding is consistent with our
event study results and suggests that the overall improvement in the merged
firms’ performance is likely due to the influx of internal capital from
wholly integrated acquirers to segmented targets, firms that, on average
are usually faced with higher capital constraints.
Keywords: financial market integration; global diversification; internal capital markets; mergers; acquisitions; (follow links to similar papers)
JEL-Codes: G15; G31; G34; (follow links to similar papers)
38 pages, December 14, 2006
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
0624netti.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
