Currency Appreciation Shocks and Shareholder Wealth Creation in Cross-Border Mergers and Acquisitions

Using a comprehensive sample of cross-border mergers, we find that acquirers from countries experiencing large currency appreciations realize higher abnormal announcement stock returns during both the announcement period and the post-merger period. Importantly, this shareholder wealth creation effect mainly comes from those acquirers in countries with strong shareholder rights and those acquirers with better corporate governance. We further find that acquirers from countries with weak shareholder rights tend to overpay a foreign target following a currency appreciation. Collectively, this evidence suggests that the interaction of currency appreciation and agency conflicts plays an important role in acquirer shareholder value creation.