The Characteristics of Bidding Firms and the Likelihood of Foreign Acquisitions

This paper investigates the firm characteristics of bidding firms in cross-border acquisitions. We find that the likelihood of cross-border acquisitions increases with the size of bidding firms and with the performance of bidding firms. These results indicate that large and high performing bidding firms choose foreign targets firms over domestic target firms. Further, foreign acquisitions generate significant positive abnormal returns to bidding firms. In addition, the cumulative average abnormal returns to bidding firms over the event window around the announcement day [-1, 0, 1] is significant higher for foreign acquisitions in comparison with domestic acquisitions. Finally, we find that the likelihood of cross-border acquisitions decreases with the leverage of bidding firms, which indicate that only bidding firms with a solid financial position are engaged in foreign acquisitions.