Target Company Cross-border Effects in Acquisitions into the UK

We analyse the abnormal returns to target shareholders in cross-border and
domestic acquisitions of UK companies. The cross-border effect during the bid
month is small (0.84%), although cross-border targets gain significantly more
than domestic targets during the months surrounding the bid. We find no evidence
for the level of abnormal returns in cross-border acquisitions to be associated with
market access or exchange rate effects, and only limited support for an international
diversification effect. However, the cross-border effect appears to be
associated with significant payment effects, and there is no significant residual
cross-border effect once various bid characteristics are controlled for.