The Q-Theory of Mergers: International and Cross-Border Evidence

The main implications of the Q-theory of mergers are tested for United States and seven continental European countries in both the domestic and cross-border cases. I find that European firms, much like those in the United States, tend to use mergers and acquisitions to make large increases in their capital stocks, that this choice is more sensitive to the acquirer's Tobin's Q than its direct investment, and that mergers raise the efficiency of target assets. Data from cross-border mergers between U.S. acquirers and European targets support the theory most emphatically