Gains to Bidder Firms Revisited: Domestic and Foreign Acquisitions in Canada

Abstract

We present large-sample evidence on the performance of domestic and U.S.(foreign) bidder firms acquiring Canadian targets. Domestic bidders earn significantly positive average announcement-period abnormal returns, while U.S. bidder returns are indistinguishable from zero. Measures of pre- and post-acquisition abnormal accounting performance are also consistent with a superior domestic bidder performance. Domestic bidder announcement returns are on average greatest for offers involving stock-payment and for the bidders with the smallest equity size relative to the target. Neither direct foreign investment controls, horizontal product-market relationships, nor acquisition propensities explain why domestic bidders outperform their U.S. competitors.