STOCKHOLDER RETURNS AND INTERNATIONAL ACQUISITIONS OF FINANCIAL FIRMS- AN EMPHASIS ON BANKING

The wealth effects for shareholders of American financial firms involv ed in foreign acquisitions and also the wealth effects for shareholder s of U.S. target firms acquired by foreign concerns are the topics of this study. The findings indicate that stockholders of U.S. bidding fi nancial firms (and its subset of banks) earn neither abnormal gains no r suffer abnormal losses upon the announcement of an acquisition or re gulatory approval. On the other hand, stockholders of U.S. target fina ncial firms (and its subset of banks) earn significant abnormal profit s at both the announcement of the proposed acquisition and the announc ement of regulatory approval of the acquisition. The wealth effects fo r these two samples are also compared to samples in which both parties to the acquisition are U.S. firms. The research suggests that there i s no significant difference in the size of the announcement gains or l osses for either stockholders of the target or bidding firms based on whether the acquisition is foreign or domestic. These findings conflic t with prior research which indicates that, for firms in general, stoc kholders of U.S. targets earn significantly greater wealth benefits wh en they are acquired by foreign firms than by domestic firms. Overall, these results are consistent with a competitive market for acquisitio ns of financial firms in which buyers do not earn or lose at the annou ncement of an acquisition, and in which abnormal gains are received on ly by the sellers.