Domestic vs Cross-Border M&A in the Nordics : An empirical study of value creation, distribution, and the cross-border effect on shareholders wealth

Abstract

This thesis investigates cross-border wealth effects in Nordic mergers and acquisitions (M&As), utilizing short-run event study methodology on a sample of 276 transactions from 2003 to 2023. This investigation is performed by measuring the cumulative abnormal returns (CAR) and combined total wealth effects to targets and bidders. To control for well-established determinants, we conduct a cross-sectional analysis. Ultimately, a correlation analysis is carried out to study motivations in order to further interpret our findings. Our analysis unveils a significant difference in CAR for targets in cross-border transactions (24.66%) compared to domestic transactions (16.14%). As for bidders, our findings suggest that domestic bidders experience greater gains compared to their cross-border counterparts, though the difference is not statistically significant. Furthermore we find that specifically the industries financial, industrials and high technology substantially contribute to the cross-border differences in target returns. Upon analysing the combined wealth effects, our study identifies statistically significant combined returns for both domestic (3.72%) and cross-border transactions (1.95%), observing no significant difference in the combined returns between domestic and cross-border deals. These results suggest that, on average, value creation arises from M&A announcements in the Nordics. When controlling for well-known deal and participant characteristics in our cross-sectional analysis, distinct influences on gains are revealed. Moreover, while the cross-border variable holds significance for target firms after controlling for determinants, the effect is ambiguous for bidder firms and no significance is observed. Finally, our correlation analysis examining motivations indicates synergies to be an important motive in both domestic and cross-border transactions, and suggests a probable presence of hubris.