Corporate Multinationality and Acquirer Returns

Henry, Agyei-Boapeah; Fosu, Samuel; Ntim, Collins G.

Abstract

This paper provides evidence on how corporate multinationality from the perspective of acquiring firms relates to M&A returns. Using multivariate regressions and a large dataset of over 6,000 M&As (both cross-border and domestic) by UK firms during 1987 to 2014, the paper finds multinationality to be associated with significantly higher short-run announcement returns and long-run operating performance. While the multinationality premium (higher M&A returns for multinationals) persists over time, it seems to be restricted to firms with superior resource/managerial capabilities and minimal agency problems. Finally, the multinationality premium appears to be driven by foreign acquisitions into advanced economies. The results are robust to correcting for sample selection bias and controlling for several firm and deal characteristics, as well as accounting for firm-, industry-, and year-fixed effects. Collectively, the findings imply that multinationality could be a source of value creation for acquiring firms, particularly in foreign acquisitions, which tend to be complex, and thereby, require superior managerial capabilities to succeed.

Citation

Henry, A., Fosu, S., & Ntim, C. G. (2020). Corporate Multinationality and Acquirer Returns. Abacus, 56(2), 230-267. https://doi.org/10.1111/abac.12146

• Journal Article Type: Article
• Acceptance Date: Oct 4, 2018
• Online Publication Date: Jan 8, 2019
• Publication Date: 2020-06
• Deposit Date: Jul 1, 2021
• Publicly Available Date: Jul 6, 2021
• Print ISSN: 0001-3072
• Electronic ISSN: 1467-6281
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 56
• Issue: 2
• Pages: 230-267
• DOI: https://doi.org/10.1111/abac.12146
• Keywords: Corporate multinationality; Geographic diversification; Multinational corporations; Firm capabilities; M&As; UK JEL classification : G14, G15, G34 2
• Public URL: https://nottingham-repository.worktribe.com/output/5750099
• Publisher URL: https://onlinelibrary.wiley.com/doi/10.1111/abac.12146
• Additional Information: This is the peer reviewed version of the following article: Agyei-Boapeah, H., Fosu, S. and Ntim, C.G. (2020), Corporate Multinationality and Acquirer Returns. Abacus, 56: 230-267. https://doi.org/10.1111/abac.12146, which has been published in final form at https://doi.org/10.1111/abac.12146. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions..