This study analyzes the effects of the acquisition of foreign firms by Japanese firms on the shareholder value. I estimate the market reaction to 99 announcements of cross-border acquisitions by Japanese firms valued above 50 billion yen between 1996 and 2016. In contrast to the prevailing notion that Japanese firms are not good at overseas acquisitions, I find that the market reaction to the announcement of acquisitions is not negative. In addition, the institutional characteristics and cultural differences of the target-firm country affect returns. The market reacts positively to the acquisition of firms located in countries with weak shareholder protection and that are culturally distant.
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