Geraldo M. Vasconcellos

Cross-border mergers and acquisitions: the European-US experience

Abstract Our study, utilizing logit and multiple regression models, tests the hypothesis that macroeconomic variables, in particular bond yields, exchange rates, and stock prices, influenced the number and direction of cross-border acquisitions between firms in the United States and each of four European countries: Germany, Italy, the United Kingdom, and France. While the logit model results suggest that bond yields explain the trends in cross-border acquisitions, the regression results show the US stock prices to be a good explanatory variable. In general, the results suggest that foreign acquisitions occur more frequently when bond yields in the acquirers country are higher than those from the country of the firm being acquired. In addition, a depressed US stock market relative to foreign stock markets encourages foreign acquisition of US companies.

The Contrarian/Overreaction Hypothesis: An analysis of the US and Canadian stock markets

Abstract The Contrarian/Overreaction Hypothesis implies simultaneously buying (long) previous losers and selling (short) previous winners in order to realize excess returns. The conventional wisdom is that extreme previous losers are undervalued due to investor overreaction possibly instigated by some adverse news and events. Given adequate time, previous losers will outperform the market. Conversely, the overvalued previous extreme winners will underperform the market in subsequent periods. This paper investigates the Contrarian/Overreaction Hypothesis as proposed by DeBondt and Thaler (1985, 1987) using a non-parametric methodology with a multi-factor asset pricing model, within both the US and the Canadian stock markets. Results from risk-adjusted, non-parametric, multi-factor bootstrap-simulated estimates show that, for the US, short-term and intermediate-term contrarian portfolios yield significant excess returns above the market. For the Canadian market, the intermediate-term contrarian portfolio works best.

Tests of the Contrarian Investment Strategy Evidence from the French and German stock markets

Abstract The Contrarian Investment Strategy (CIS) implies simultaneously buying previous losers and selling previous winners. This paper examines the CIS as first proposed by DeBondt and Thaler (1985) (Journal of Finance 40, 793–808) in an effort to expand and complement existing research. Results from our risk-adjusted, nonparametric, multifactor, bootstrap-simulated estimates show that, for both the French and German stock markets, short-term contrarian portfolios work best. Overall, the highest contrarian profits are obtained in the short run and the profits decrease over time. In addition, higher returns are not correlated to increases in the risk coefficients, which is consistent with investor overreaction.

The dynamics of sovereign credit default swap and bond markets: empirical evidence from the 2001 to 2007 period

This article evaluates the dynamic relationship between sovereign Credit Default Swap (CDS) and bond markets over the period 2001 to 2007 across 30 emerging markets. Our results suggest that the bond markets play a significant role in the price discovery process, which is in contrast with the corporate studies. We also show that the CDS markets play a more dominant role in lead–lag relationships compared to earlier studies on the sovereign credit markets.

Cross-border mergers and acquisitions: The undervaluation hypothesis

The growing interdependency of the global economy has developed new relationships between economic agents of different countries. In the last decade, a very interesting phenomenon has surfaced in the international market for corporate control. In a reversal of previous patterns, the number of foreign firms acquiring U.S. firms has been larger than the number of U.S. firms taking over foreign companies. The exact motivations for this switch in the role of U.S. firms from bidder to target are many. We focus our attention on the quest for undervalued assets. Under our undervaluation hypothesis, we postulate that the existence of market imperfections that cause frictions in the product and service markets also contributes to favor the acquisition of a company already operating. Thus, in order to minimize the costs penetrating into foreign markets, firms will search across national boundaries for undervalued companies as targets for their acquisitions. The results of this study offer support for this viewpoint.

An empirical investigation of factors affecting cross-border acquisitions: the United States vs. United Kingdom experience

Since the 1981-1982 recession in the United States, there has been a marked increase in domestic merger and acquisition activity. For example, the number of acquisitions involving U.S. companies was 2,296 and 3,701, respectively, for 1982 and 1987. The value of mergers involving U.S. companies also increased from about

The post-privatization financial performance of former state-owned enterprises

60 billion in 1982 to over

Factors Affecting Cross-Border Mergers and Acquisitions: The Canada-U.S. Experience

167 billion in 1987. Cross-border acquisitions involving U.S. firms have also become more common, increasing from 364 in 1982 to 553 in 1987. During 1988, the number of cross-border acquisitions involving U.S. firms reached 605. While the number of annual cross-border acquisitions has generally increased over time, the composition of cross-border activity has shifted abruptly in some periods. For example, U.S. acquisitions of non-U.S. firms increased modestly from 149 in 1983 to 177 in 1987 while foreign acquisitions of U.S. firms rose substantially over this same period. In 1983, there were 116 foreign acquisitions of U.S. firms, valued at about

A Valuation Model for International Acquisitions

2.2 billion. This increased to 363 foreign acquisitions of U.S. firms valued at about

Random walks in the U.K. pound/ U.S. dollar exchange rates

42 billion in 1987. To put it another way, U.S. firms acted as acquiring firms in about 56 percent of the cross-border acquisitions involving U.S. firms in 1983, versus only about 26 percent in 1987. Some of the more publicized foreign acquisitions of U.S. firms include Sony’s acquisition of CBS Records Group, Bridgestone’s acquisition of Firestone Tire & Rubber Co., Nestle’s acquisition of Carnation, and the Royal Dutch/Shell buyout of Shell Oil.