Asymmetric Information, Cross Border Acquisitions, Premiums, and Post Acquisition Returns

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Description of Research Project

The objective of this study is to look at potential different Premiums and rates of returns of an acquiring firm from conducting a Cross Border Merger and Acquisition (CBMA) under different degrees of presence in the target country. In general there are varying degrees of asymmetric information in a CBMA, associated with different factors such as differences in institutions between the acquiror and target, expertise between the two CEOS, relationships between the acquiring firm and target firm, and knowledge of the business environment in the target region. This paper focuses on the latter factor. We investigate acquiror Premiums Paid on the target stock price and rates of returns post acquisition of firms that have different degrees of presence (no presence, presence, minority stake in target firm) in the countries of the United States, Japan, Germany, the UK, India and France over the years 1998-2025 based on the degree of presence in the target country.

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Undergraduate Student Responsibilities

The student's responsibilities will be to collect data from firms from the above countries (section 6)and years regarding premiums paid from acquisitions on the target firm's stock price, data on the stock price of the acquiring firm at various periods before the announcement date of the acquisition, whether or not the acquiring firm had a presence in the country of the target firm before the announcement, the post acquisition returns of the acquiring firm, and acquiring firm control variables such as total assets, market to book values, profits, EBITDA, over the years stated above (section 6). Comparisions will be made on the data of acquiring firms that had a presence before the announcement relative to the firms that did not have a presence.

Our sources of the material, in particular the data, will be from the Refinitiv Eikon database for the Mergers and Acquisitions data, from Capital IQ for the financial data and the presence vs non presence data, and for the standard control variables we will use the data from the Financial Market Development database of the IMF and Institutional Quality Index data from the World Bank Governance Index database.

Along with the data retrieval, work will involve cleaning the data and producing summary statistics tables and potentially running regressions.

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Qualifications Required

Knowledge in the use of Excel regarding sorting and cleaning data and producing tables from the data, and some knowledge of standard financial variables, and standard statistical theory and applications.