| This study investigates the valuation effects of international mergers and acquisitions of financial firms. Abnormal returns accruing to shareholders of financial firms participating in international mergers and acquisitions are hypothesized to be statistically different from those arising out of domestic acquisitions.;Several factors may be responsible: first, the degree of informational asymmetry is higher in international acquisitions vis-a-vis domestic ones--the differences will be more pronounced depending on the extent of previous presence of the acquirer in the target country. Further, to the extent markets are imperfect, shareholders may perceive benefits from international diversification, which causes an upward revaluation of the shares of those financial firms announcing international acquisitions.;Third, the abnormal returns arising out of the international 'intent-to-acquire' announcement may include a higher penalty for the greater risk inherent in obtaining inter-country regulatory approval, as compared to a domestic 'intent-to-acquire' announcement.;Fourth, since regulations affect the set of participating bidders and targets and hence the competitive pressure in the acquisitions market, both the division of gains between bidder and target shareholders as well as the premia paid in any particular acquisition, may be different from their domestic counterparts.;Using a sample of 220 international acquisition events, spanning eleven countries, over the time period 1977-1987, this study tests the above hypotheses using the event study methodology and finds significant differences between domestic and international acquisitions.;Finally, the study also identifies a possible set of determinants of the valuation effects of international bank acquisitions. The determinants include the method of payment and the extent of the acquisition.;The overall evidence provides insight into the underlying factors motivating these acquisitions. It also provides evidence on the degree of competition and segmentation in the international market for bank control. |
