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 around
the announcement of acquisitions. The wealth effects do vary with location of
target firms and acquirers' industry affiliation. Acquisitions in Europe yield
significant positive wealth gains while acquisitions in AsiaIPacfic, North
America, and Latin/Central America regions yield negative wealth gains. The
highest wealth gains to U.S. acquirers occur when they acquire targets in
France followed by acquisitions in the UK. Canadian acquisitions, on the other
hand, yield negative significant wealth gains. The highest wealth gains are also
observed in the services industry followed by acquisitions in the manufacturing
and food industries. Acquisitions in mining/extraction, paper products, and
communications sectors, on the other hand, yield statistically significant negative
wealth gains to acquirers.