The Geography of Block Acquisitions

Using a large sample of partial block acquisitions in the U.S., we examine the importance of geographic proximity in corporate governance and target returns. We find that block acquirers have a strong preference for geographically proximate targets and acquirers that purchase block shares in such targets are more likely to engage in post-acquisition target governance activities than are remote block acquirers. Moreover, the targets of these acquirers realize higher abnormal announcement returns and better post-acquisition operating performance than do targets of other types of acquirers. The positive valuation effects for targets are stronger when targets are smaller, when targets are riskier, when targets have a higher level of Ramp;D investments, when targets perform poorly, or when targets have higher insider ownership, suggesting that information asymmetries or monitoring costs associated with geographic proximity are an important source of gains in partial block acquisitions