The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions.

This study presents direct evidence on the effect of international acquisitions on stock prices of U.S. bidding firms. Shareholders of multinational corporations not operating in the target firm's country experience significant positive abnormal returns at the announcement of international acquisitions. Shareholders of U.S. firms expanding internationally for the first time experience insigni ficant positive abnormal returns, while shareholders of multinational corporations operating already in the target firm's country experience insignificant negative abnormal returns. The abnormal returns are larger when firms expand into new industry and geographic markets-especially those less developed than the U.S. economy. Copyright 1988 by American Finance Association.