Ninon K. Sutton

How Does National Culture Impact Internalization Benefits in Cross-Border Mergers and Acquisitions?

We examine how cultural differences between bidder and target countries impact internalization benefits in cross-border takeovers. The value of internalizing intangible assets may increase if cultural differences create high transaction costs. On the other hand, integration difficulties between culturally distant acquirers and targets may reduce the value of internalization. Our results show that greater cultural distance (CD) has a positive influence on the long-run performance of bidders with high intangibles, suggesting that significant internalization benefits from technological know-how are realized when CD is great. These findings highlight the importance of national culture when examining internalization benefits in cross-border mergers.

The post-repurchase announcement drift: an anomaly in disguise?

Purpose - – The purpose of this paper is to reexamine the stock price drifts after open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms’ earnings improvement in the announcement year relative to the prior year. Design/methodology/approach - – The authors use the calendar-time method and matching method based on different criteria to calculate the post-announcement abnormal returns. Findings - – The results show that only firms actually repurchasing their shares exhibit a positive post-announcement drift. More importantly, the authors find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. This supports the argument that the post-repurchase announcement drift found in previous studies is not a distinct anomaly but the post-earnings announcement drift in disguise. Social implications - – The post-repurchase announcement drift found in previous studies is the post-earnings announcement drift in disguise. Originality/value - – The study shows that because high earnings performance positively relates to real repurchase activities, controlling for earnings performance in examining whether a drift occurs after repurchase announcements.