Cross-border arbitrage and acquirers’ returns in the Eurozone crisis

Salaber, Julie and Rao-Nicholson, Rekha 2018. Cross-border arbitrage and acquirers’ returns in the Eurozone crisis. Journal of Economics and Business. 95, pp. 87-102. doi:10.1016/j.jeconbus.2017.05.001

TitleCross-border arbitrage and acquirers’ returns in the Eurozone crisis
AuthorsSalaber, Julie and Rao-Nicholson, Rekha
Abstract

Using a sample of 1,263 European acquisitions over 2004–2012, we show that the performance of cross-border acquisitions is significantly affected by the Eurozone and the euro debt crisis. First, due to financial market integration and the elimination of exchange rate risk, intra-Eurozone acquisitions do not earn any abnormal returns for bidders. Second, as a result of the euro debt crisis and the temporary misvaluation among European countries, acquisitions earn positive abnormal returns only for non-Eurozone companies acquiring Eurozone targets. These abnormal returns are driven by the depreciation of the euro and the use of low-cost capital available to overvalued acquirers.

JournalJournal of Economics and Business
Journal citation95, pp. 87-102
ISSN0148-6195
Year2018
PublisherElsevier
Digital Object Identifier (DOI)doi:10.1016/j.jeconbus.2017.05.001
Publication dates
Published in print2018
Published online04 Jun 2017
Published04 Jun 2017

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