Gains to Bidder Firms Revisited: Domestic and Foreign Acquisitions in Canada

Abstract

We present large sample evidence on the performance of domestic and U.S. (foreign) bid? der firms acquiring Canadian targets. Domestic bidders earn significantly positive average announcement period abnormal returns, while U.S. bidder returns are indistinguishable from zero. Measures of pre- and post-acquisition abnormal accounting performance are also consistent with a superior domestic bidder performance. Domestic bidder announce? ment returns are, on average, greatest for offers involving stock payment and for the bid? ders with the smallest equity size relative to the target. Neither direct foreign investment controls, horizontal product market relationships, nor acquisition propensities explain why domestic bidders outperform their U.S. competitors.