The Impact of Target Location and Method of Payment in M&As on Shareholders Wealth of U.S. Pharmaceutical Bidders
Saudi Digital Library
This study investigates the impact of 211 merger announcements on U.S. acquirer shareholders wealth between 2010 and 2020. More specifically, it focuses on the pharmaceutical industry and investigated whether the method of payment (cash or stock) or the target’s location (domestic or cross-border) significantly impact shareholders wealth. The event study methodology and the regression’s results suggest that shareholders of bidding firms witness a positive return on and around the announcement. More specifically, findings reveal that cash-financed and domestic mergers have no statistically significant impact on shareholders wealth suggesting those deals suffer from the hubris. Lastly, stock-financed, and cross-border deals had a positive impact on acquirer shareholders wealth reflecting the perception of diversification across markets, potential synergies, and risk sharing.