â¢ MARCH 1975 The Journal of FINANCE VOL. xx MARCH 1975 No. OPTIMAL INTERNATIONAL ACQUISITIONS MICHAEL ADLER AND BERNARD DUMAS* I. INTRODUCTION AND SUMMARY To DATE, the multifarious recent analyses of the theory of conglomerate mergers have all been confined to the one-country case where the stock of the parent and its subsidiaries are all traded on a single capital market. This paper aims to innovate by using the theory of capital asset pricing to extend the theory of conglomerate acquisitions to the international setting. The international conglomerate merger movement continues to thrive. Multinational firms in the U.S. and abroad routinely make many (direct) foreign investments by purchasing the stock of foreign firms in related or other industries. Our enquiry is therefore also motivated by the pressing need to establish additional foundations for a financial theory of the multinational firm. These concerns have so far largely escaped attention in the financial literature. It is not the mere existence of foreign subsidiaries or of investors and managers in many countries which makes the analytical setting international from the financial viewpoint. If investors from many countries shared a common currency and traded their stock on a single, central, perfect capital
The Journal of Finance – Wiley
Published: Mar 1, 1975
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