Maximizing shareholder value or management's prestige? An analysis of takeovers of U.S. firms by cross-listed and cross-delisted European acquirers
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School of Economics | Master's thesis
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AbstractPURPOSE OF THE STUDY The purpose of this thesis is to address the lack of empirical research on the transatlantic acquisition performance of European companies that are cross-listed in the U.S.. Furthermore, this thesis is the first piece of empirical research studying the relation between M&A activity and cross-delisting. The objective of the study is two-fold. First, I examine the acquisition performance of cross-listed companies by comparing them to acquisitions by a control group. Second, I compare the acquisition performance of the cross-listers before cross-listing, during cross-listing, and after cross-delisting. DATA The data used in this study is gathered from multiple sources. First, a database of cross-listed companies is collected by searching the websites of the U.S. exchanges, Thomson Financial SDC database (SDC), and Citigroup ADR service for European companies that have been cross-listed in the U.S. between 1.1.1980 and 31.12.2008. This yields a sample of 281 cross-listed companies. Dow Jones STOXX Total Market Index for Europe is used as a control group. Second, I search SDC for M&A transactions by the cross-listers and the control group during the time period 1.1.1996 - 31.12.2008. This gives a sample of 105 acquisitions by cross-listed companies prior to cross-listing, 451 acquisitions during cross-listing, 72 acquisitions after cross-listing, and 951 acquisitions by the control group. I manually collect a unique database of publication hits in Business Week, Financial Times and Wall Street Journal around the announcement of an M&A transaction from LexisNexis database. Furthermore, I gather price data for individual companies, market indices, and money market funds from Thomson Financial Datastream database (Datastream). Data on financial statements, country of incorporation, and industry is from Thomson Financial Worldscope. I also collect exchange rate data from Datastream. RESULTS My results indicate that European companies that are cross-listed in the U.S. get a lot more visibility in prestigious business publications than their non-cross-listed peer companies. This suggests that the management of the cross-listed companies are likely to suffer from hubris. Furthermore, the regression analysis shows that there is a negative relation between the attained publicity and gains from acquisitions. In line with this notion, the cross-listers seem to make worse acquisitions than their non-cross-listed peers, however, the result is not consistently significant and appears to relate to other characteristics of the transactions, such as firm size and company status of the target firm. Cross-delisting seems to significantly decrease visibility in prestigious business publications. Furthermore, the results also indicate that M&A performance increases after cross-delisting, however, the result is not consistently significant. Same effect is visible in the regression analysis, but also it is statistically insignificant. There are no differences in acquisition performance or publication hits prior to cross-listing and during cross-listing.
M&A, merger, acquisition, takeover, cross-listing, cross-delisting, hubris, publication hits, cumulative abnormal return, CAR, cross-border