ABSTRACT
In this paper we investigate the main features of the domestic and cross-border corporate acquisitions involving 38 European countries in the period 2003-2010. The analysis is based on characteristics of takeover transactions such as the type of transaction, relative value of the deal, payment method, legal status of the target firm, and activity relatedness, among other factors. In addition, we investigate the short-term wealth effects of 2,821 European mergers and acquisitions initiated by large and medium-sized European public firms. We find that, upon announcement, domestic acquiring firms earn higher abnormal returns than cross-border bidders. Our findings are in line with those reported on the US market and are robust when we control for different bid and firm characteristics. Moreover, we find that bidding firm?s shareholders gain more in equity offers than in cash offers whether the acquisition is cross-border or domestic. When a Continental European target is involved, the bidder abnormal returns are higher than those of bids involving a UK or Irish target. We observe that cross-border bidding firms tend to experience lower announcement returns if target firms are located in countries with strong investor protection mechanisms. That is, bidding firms from Continental Europe must compensate target firm shareholders (i.e., pay higher premiums) if the quality of the corporate governance is reduced.