Wealth Effect For U.S. Acquirers From Foreign Direct Investments

Abstract

This study investigates the wealth effects of foreign direct investments on U.S.firms during the period of 1989-2000. Overall findings indicate that U.S.acquirers experience statistically significant wealth gains of 0.57 percent aroundthe announcement of acquisitions. The wealth effects do vary with location oftarget firms and acquirers' industry affiliation. Acquisitions in Europe yieldsignificant positive wealth gains while acquisitions in AsiaIPacfic, NorthAmerica, and Latin/Central America regions yield negative wealth gains. Thehighest wealth gains to U.S. acquirers occur when they acquire targets inFrance followed by acquisitions in the UK. Canadian acquisitions, on the otherhand, yield negative significant wealth gains. The highest wealth gains are alsoobserved in the services industry followed by acquisitions in the manufacturingand food industries. Acquisitions in mining/extraction, paper products, andcommunications sectors, on the other hand, yield statistically significant negativewealth gains to acquirers.