The role of acquisitions in foreign direct investment: evidence from the U.S. stock market

Article Abstract:

This paper examines foreign direct investment by studying shareholder wealth gains for 1273 U.S. firms acquired during the period 1970-1987. Three findings stand out. First, cross-border takeovers are more frequent in research and development intensive industries than are domestic acquisitions; furthermore, in three-fourths of cross-border transactions the buyer and seller are in related industries. These industry patterns suggest that costs and imperfections in product markets play an important role in foreign direct investments. Second, targets of foreign buyers have significantly higher wealth gains than do targets of U.S. firms. This cross-border effect is comparable in size to the wealth effects of all-cash and multiple bids, two effects receiving substantial attention in the finance literature, and is robust to inclusion of these two variables. Third, while the cross-border effect on wealth gains is not well explained by industry and tax variables, it is positively related to the weakness of the U.S. dollar, indicating a significant role for exchange rate movements in foreign direct investment. (Reprinted by permission of the publisher.)

Foreign investments, Acquisitions and mergers, Stock-exchange, Stock exchanges

---

Tick size, share prices, and stock splits

Article Abstract:

Minimum price variation rules help explain why stock prices vary substantially across countries, and other curiosities of share prices. Companies tend to split their stock so that the institutionally mandated minimum tick size is optimal relative to the stock price. A large relative tick size provides an incentive for dealers to make markets and for investors to provide liquidity by placing limit orders, despite its placing a high floor on the quoted bid-ask spread. A simple model suggests that idiosyncratic risk, firm size, and visibility of the firm affect the optimal relative tick size and thus the share price. (Reprinted by permission of the publisher.)

---

The effects of stock splits on bid-ask spreads

Article Abstract:

This paper examine the effects of stock splits on bid-ask spreads for NYSE-listed companies. Percentage spreads increase after splits, representing a liquidity cost to investors. These spread increases are directly related to decreases in share prices following splits and can explain part, but not all, of the observed increase in return variability after splits. The evidence thus suggests a liquidity cost of stock splits that must be weighed against any other perceived benefits of splits. Such a liquidity cost may validate that stock splits are a signal of favorable information about the firm. (Reprinted by permission of the publisher.)

New York Stock Exchange Inc.

Similar abstracts:

• Abstracts: Forward and futures prices: evidence from the foreign exchange markets. Are real interest rates equal across countries? An empirical investigation of international parity conditions
• Abstracts: Value creation in acquisitions: a re-examination of performance issues. part 2 Sources of value creation in acquisitions: an empirical investigation
• Abstracts: Andersen Consulting: grand designs on IT. An investment culture in need of therapy. Wadia quits as Andersen Consulting splits from AA
• Abstracts: The behavior of Eurocurrency returns across different holding periods and monetary regimes. The issue decision of manager-owners under information asymmetry

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.