Do Domestic and Cross-Border M&As Generate Different Bidder Returns? Evidence from Swedish Acquirers.

Abstract

This study examines whether bidder returns differ between domestic and cross-border deals when a merger or acquisition (M&A) is announced. The focus is on Swedish acquirers over a time horizon ranging from the beginning of 2014 to the end of 2024. Three hypotheses are tested around the questions: Do domestic M&As yield significantly higher returns than cross-border M&As? Do bidder cumulative abnormal returns in cross-border M&As decrease as cultural distance between the acquiring and target country increases? Do acquisitions involving private target firms yield higher bidder returns compared to acquisitions involving public target firms? The hypotheses are tested using standard event study methodology and cross-sectional regression models. The dataset consists of 284 M&A announcements, including 109 domestic and 175 cross-border deals. Data was retrieved from LSEG and FinBas. The main finding is that cross-border deals yielded higher bidder returns compared to domestic transactions, contradicting with the study’s hypothesis. Contrary to the expectation that cultural distance reduces bidder CAR, the results suggest a positive relationship between cultural distance and bidder returns. No statistically significant evidence was found regarding the impact of the target firm’s public status on bidder CAR. The findings of this study contribute to closing a geographic research gap, as Sweden had been relatively unexplored in this area prior to this research.