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Does all of this activity pay? The following points highlight the findings of 17 studies regarding the abnormal returns to shareholders at the announcement of cross-border acquisitions.

 Returns to targets of foreign buyers. Exhibit 5.7 shows that returns to target shareholders are significantly positive. Two studies report that U.S. targets receive materially higher returns than do foreign targets. In five studies, returns of U.S. targets are higher with foreign buyers than domestic buyers. One study, by Dewenter (1995) yields the provocative suggestion that the difference in results between U.S. and foreign buyers could be due to differences in industrial profiles of the two groups of acquisitions—much more research is required here. Cross-sectional analyses suggest that returns to targets vary significantly by country, industry, and currency rates.

 Returns to buyers of foreign targets. Exhibit 5.8 shows that returns to buyer shareholders are essentially zero. In four studies, U.S. buyers of foreign targets earn returns insignificantly different from zero. In 12 studies of returns to foreign buyers, one reports significantly negative returns, two report significantly positive returns, and the rest report returns insignificantly different from zero.

 Joint wealth changes to buyers and targets. Exhibit 5.9 summarizes three studies that report positive joint wealth gains (two of them are significant) to shareholders of buyers and targets.

The total picture appears to be that cross-border M&A does pay. Consistent with the findings for U.S. domestic M&A reported in Chapter 3, targets earn large returns; buyers essentially break even; and on a combined basis, shareholders gain. We are left with the general impression that foreign bidders pay more than domestic bidders. Kohers and Kohers (2001) have argued that this premium represents payment for special local knowledge and market access that the target provides the foreign buyer.

EXHIBIT 5.7 Returns to Targets of Foreign Buyers

Study	Cumulative Abnormal Returns (% or avg$/acq)	Sample Size	Sample Period	Event Window (Days)	Notes
Conn, Connell (1990)	0.1822* non-U.S. (DMM) 0.1984* non-U.S. (IMM) 0.3986* U.S. (DMM) 0.4331* U.S. (IMM)	73	1971–1980	–1,0	“Non-U.S.” and “U.S.” indicate country of target firm. “IMM” indicates returns estimated using a market model with an international market index. “DMM” uses a domestic market index.
Biswas et al. (1997)	0.0623* all observations	81	1977–1987	–1,0	Focus is non-U.S. targets and financial sector deals.
	0.0350* non-U.S.	33
	0.0752* U.S. only	48
	0.1069* U.S. domestic	N/A
Wansley et al. (1983)	0.3864* target of foreign buyer	39	1970–1978	–40,0	Focus is U.S. targets.
	0.2800* target of U.S. buyer Difference is significant at 5% level.	164
Shaked et al. (1991)	0.168* foreign buyer	29	1980–1983	–1,0	Focus is U.S. targets.
	0.148* domestic buyer Difference is significant in oils, mining, and machinery.	82
Harris, Ravenscraft (1991)	0.397* foreign buyers	1,273	1970–1987	–5,0	Focus is U.S. targets.
	0.263* U.S. buyers
Marr et al. (1993)	0.1182* foreign buyers 0.0627* U.S. buyers Difference is significant at 5% level.	96	1975–1987	–1,0	Focus is U.S. targets.
Kang (1993)	0.0907* Japanese buyers 0.0684 U.S. buyers Difference is not significant.	102	1975–1988	–1,0	Focus is U.S. targets.
Pettway, Sicherman, Speiss, (1993)	0.3700†	10	1981–1991	–1,0	Focus is U.S. targets of Japanese buyers.
Servaes, Zenner (1994)	0.3802* 1979–1980 0.1520* 1981–1986 0.4161* 1987–1988	779	1979–1988	N/A	Focus is U.S. targets.
Dewenter (1995)	Domestic acquisition premium is not significantly different from foreign acquisition premium.	294	1978–1989	N/A	Focus is U.S. targets. Looked at premiums unique to two industries, chemicals and retailing. Argued that observed differences in other studies were due to industry composition of samples.
Eun, Kolodny, Scheraga (1996)	0.3702* all observations 0.3715* Canadian buyers 0.4855* Japanese buyers 0.3555* U.K. buyers’ 0.3530* all other buyers	213	1979–1990	–5,0	Focus is U.S. targets.
Kiymaz, Mukherjee (2000)	Strong effects of currency and relative GNP growth rates of two countries.	141	1982–1991	–1,0	Focus is U.S. targets.
Kuipers, Miller, Patel (2003)	+23.07%† $121.86 MM†	181	1982–1991	–1,0	Focus is U.S. targets.

*Significant at the 95 percent confidence level.

†Significant at the 99 percent confidence level.

EXHIBIT 5.8 Returns to Buyers of Foreign Targets

Study	Cumulative Abnormal Returns (% or avg$/acq)	Sample Size	Sample Period	Event Window (Days)	Notes
Conn, Connell (1990)	–0.0787* a non-U.S.(DMM) –0.0677* a non-U.S.(IMM) –0.025 U.S. (DMM) –0.026 U.S. (IMM)	73	1971–1980	–1,0	“Non-U.S.” and “U.S.” indicate country of buyer firm. “IMM” indicates returns estimated using a market model with an international market index. “DMM” uses a domestic market index.
Kang (1993)	0.0059 Japanese buyers	119	1975–1988	–1,0	Focus is non-U.S. buyers of U.S. targets.
	–0.029. U.S. buyers Difference is significant at 5%.	102
Mathur et al. (1994)	–0.0026	77	1984–1988	–1,+1	Focus is non-U.S. buyers of U.S. targets.
Servaes, Zenner (1994)	0.0044 takeovers 0.0005 units and minority interests	70	1979–1988	–1,0	Focus is non-U.S. buyers of U.S. targets.
Eun, Kolodny, Scheraga (1996)	–0.0120 all observations 0.0318 Canadian buyers 0.0362 Japanese buyers –0.0428 U.K. buyers –0.0046 all other buyers	117	1979–1990	–5,0	Focus is non-U.S. buyers of U.S. targets.
Cakici et al. (1996)	0.0046* foreign bidder 0.0000 U.S. bidder	195	1983–1992	–1,0	Focus is non-U.S. buyers of U.S. targets.
Doukas, Travlos (1988)	0.009 All observations –0.0003 operating in target’s country 0.011 not operating in target’s country 0.0199* going abroad first time	301	1975–1983	–1,0	Focus is U.S. buyers of foreign targets.
Pettway, Sicherman, Speiss, (1993)	0.0152†	16	1981–1991	–1,0	Focus is Japanese buyers of U.S. targets.
Markides, Ittner (1994)	0.0032 all observations 0.0055 related acquisitions –0.0087 unrelated	274	1975–1988	–1,0	Focus is U.S. buyers of foreign targets.
Yook, McCabe (1996)	0.0046 all observations 0.0085 large acquisitions	98	1979–1989	–1,0	Focus is U.S. buyers of foreign targets.
Biswas et al. (1997)	0.00126 all observations 0.00277 U.S. buyer, foreign target 0.00015 foreign buyers, foreign targets –0.00399* U.S. buyer and target	125	1977–1987	–1,0	Focus is buyers of foreign targets.
Kiymaz, Mukherjee (2000)	Strong effects of monthly stock returns and relative GNP growth rates of two countries.	112	1982–1991	–1,0	Focus is U.S. buyers of foreign targets.
Eckbo, Thorburn (2000)	–0.0030 U.S. buyers 0.0171 Canadian buyers	390 1,261	1964–1983	–1,0	Focus is U.S. and Canadian buyers of Canadian firms.
Kuipers, Miller, Patel (2003)	–0.92% –$31.26MM	138	1982–1991	–1,0	Focus is foreign acquirers of U.S. targets.

*Significant at the 95 percent confidence level.

†Significant at the 99 percent confidence level.

EXHIBIT 5.9 Summary of Shareholder Return Studies for M&A: Combined Returns to Shareholders of Acquiring Firm and Target Firm

Study	Cumulative Abnormal Returns	Sample Size	Sample Period	Event Window (Days)	Notes
Eun, Kolodny, Scheraga (1996)	$68 million, average combined wealth changes. $398 million.	117	1979–1990	–5,0	Focus is non-U.S. buyers and U.S. targets.
Biswas et al. (1997)	$135.4 million, average combined wealth changes, international acquisitions; 3.39% as percentage of size. $2.04 million, domestic acquisitions; 2.02% as percentage of size. Both are significant at 5%.	125	1977–1987	–5,+5	Focus is buyers of foreign targets.
Kuipers, Miller, Patel (2003)	+2.99%* $121.86 MM†	120	1982–1991	–1,0	Focus is U.S. targets and foreign acquirers.

*Significant at 95 percent confidence level.

†Significant at 99 percent confidence level.