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Abstract

The research presented here indicates that foreign acquisitions in the United States in the form of mergers, have resulted in abnormal returns to targets of nearly 22 percent, a figure not much higher than in domestic mergers. Sell-off abnormal returns have averaged nearly three percent, substantially higher than the average 0.7 to 1.66 percent in the domestic case. We find that merger abnormal returns have been substantially higher in our first subperiod (1982–84) than in the second (1985–87). For selloffs, our results are reversed-abnormal returns have been higher in the second subperiod. In cross-sample tests, we find the Japanese paying the highest merger premiums/abnormal returns, while the sell-off abnormal returns are highest when Germans are the buyers. We also find significant differences across industry samples but not across combination type samples. We do not find a significant relationship of these abnormal returns to the firm's accounting and financial variables.