Gains to Bidder Firms Revisited: Domesticand Foreign Acquisitions in Canada

Abstract

We present large sample evidence on the performance ofdomestic and U.S. (foreign) bidder firms acquiringCanadian targets. Domestic bidders earnsignificantly positive average announcement periodabnormal returns, while U.S. bidder returns areindistinguishable from zero. Measures of pre- andpost-acquisition abnormal accounting performance arealso consistent with a superior domestic bidderperformance. Domestic bidder announcement returnsare, on average, greatest for offers involving stockpayment and for the bidders with the smallest equitysize relative to the target. Neither direct foreigninvestment controls, horizontal product marketrelationships, nor acquisition propensities explainwhy domestic bidders outperform their U.S.competitors.