Title

The market effects of acquisition-related foreign direct investments in the U.S.

SelectedWorks Author Profiles:

Sridhar Sundaram

Document Type

Article

Publication Date

1992

ISSN

1062-9408

Abstract

Theories of foreign direct investment (FDI) indicate that both location and firm specific advantages must be present for FDI to be feasible. These advantages can be readily exploited by expansion through the utilization of external markets. Therefore, international acquisitions can best be explained by the perceived benefits associated with internalization. Acquisitions allow bidders to capture partially the gains associated with internalization of markets for their products and services, and to partially distribute them to target firm shareholders. The results of this study support the hypothesis that target shareholders receive abnormal positive returns. However, returns to bidder stockholders are zero, indicating that either investors do not price positively the benefits of FDI, or that costs associated with managerial perquisites, the winner’s curse, and ineffective utilization of free cash flow outweigh positive FDI benefits.

Comments

Citation only. Full-text article is available through licensed access provided by the publisher. Members of the USF System may access the full-text of the article through the authenticated link provided.

Language

en_US

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.