Trade Networks and Cross-Border Acquisitions: Evidence from United States Acquiring Firms

This study examines the impact of the trade networks of target firms' nation on the announcement returns of the cross‐border acquisitions of United States acquirers. By using a sample of 818 cross‐border acquisitions during 2000–2007, we find that the centrality measure of trade networks has a positive impact on announcement returns, after controlling for Hofstede's cultural distance measure between the acquiring and target nations and various firm‐ and deal‐specific factors. In sum, trade network analysis, based on strength centrality, better explains the performance of acquiring firms than does the bilateral trade openness measurement used in previous studies.