| The 1980s were marked by a boom in merger and acquisition activity within the US as companies sought diversification and new sources of growth. During this period, international investment picked up as well stimulated in part by corporate globalization efforts. This dissertation examines merger and acquisition activity in countries that have been the major recipients of US investment over the last ten years.;The empirical analysis examines how the level of US merger and acquisition activity of international firms varies with the strength of the US dollar, taking into account macroeconomic variables such as GNP, interest rates, and stock market levels as well as two geographic factors, distance and language. This analysis finds significant relationships between number of acquisitions and foreign market size, distance, and language, but no significant relationship with the exchange rate. Even after sample selection, the transactions included in the analysis represent about 80% of the universe.;This dissertation also examines the issue of shareholder returns, do bidding company shareholders of US firms benefit from international merger and acquisition activity? The empirical study employs the event study methodology to examine monthly returns of US firms around the announcement date of a foreign merger or acquisition and finds, consistent with the findings in the domestic M&A literature, that bidding firms do not realize significant abnormal returns.;A brief overview of divestitures contrasts with the acquisition literature. Research indicates that both sellers and buyers of divested assets benefit from the transaction. With divestitures representing 30-40% of the number of acquisitions and their growth matching that of acquisitions, this area merits further exploration.;The contribution of this paper is threefold. First, it extends the international merger and acquisition literature in the area of outward US investment and incorporates an innovative twist, that of geography, borrowing from the economics literature to answer a financial question. Second, the data used in the empirical tests come from a relatively new on-line data base provided by Securities Data Corporation (SDC). Finally, the data used in the first part of the analysis is used to revisit the international investment decision from the shareholders' perspective. |
