Shareholders’ reactions to announcements of acquisitions of private firms: Do target and bidder markets make a difference?

We study announcement effects of cross-border acquisitions of private firms on short-term bidders’ stock market returns in the European Union. We assume that the development status of the target market and the governance within the bidder market make a difference. Investors of bidding companies react positively to private acquisition announcements in both China and the United States of America (US). Moreover, the bidder returns do not differ significantly between the two target markets. We find bidder market effects for the US: private acquisitions by civil law firms generate smaller bidder returns, while relatively large private acquisitions by common law firms increase such returns. For China we do not find bidder market effects, nor variables that significantly explain shareholders’ reactions to announcements of private acquisitions.