The long-run performance of cross-border mergers and acquisitions: Evidence to support the internalization theory

Our study contributes to improving the understanding of cross-border M&As in two domains: evaluation of the long-term financial performance of acquiring firms in cross-border M&As and detection of the determinants of their long-term success. Our results show no sustained gains or losses during the post-acquistion period for Canadian acquirers. In contrast to their performance in domestic M&As, Canadian firms carrying out crossborder M&As do generate enough value to keep up with stockmarket requirements, relative to their risk level as determined by the Fama & French three-factor model and the level of returns generated by peer firms in their main industrial sector. Our findings agree with the internalization theory and suggest that acquiring firms engaged in cross-border M&As can indeed realize efficiency gains and create long -term value for their shareholders, but only under certain conditions: namely, when they possess high levels of R&D and a strong combination of R&D and intangibles