Domestic versus Cross-Border M&A and Shareholder Value: An Event Study of Microsoft, 2014 – 2019

Abstract

This study examines whether the geographical scope of mergers and acquisitions (M&A) influences shareholder value by comparing the market response to Microsoft’s domestic and cross-border acquisition activity during 2014 – 2019. The period captures an important phase in Microsoft’s strategic transformation under Satya Nadella, during which acquisitions became an increasingly visible mechanism for expanding technological capabilities, accessing complementary resources, strengthening digital ecosystems, and extending the firm’s international reach. Rather than treating all Microsoft-related transactions as homogeneous, the study reconstructs the original transaction dataset and restricts the empirical sample to completed deals in which Microsoft or a Microsoft-affiliated entity appears on the acquiring side. This procedure yields 56 acquisition observations, comprising 32 domestic and 24 cross-border transactions, and reduces contamination from transactions in which Microsoft participated only as an investor, target, or related parent entity. An event-study methodology is employed to measure short-run shareholder wealth effects. Daily Microsoft stock returns are evaluated relative to market-model expected returns estimated over a pre-event estimation window of approximately -100 to-10 trading days. Abnormal returns are subsequently examined over a seven-day event window [-3, +3], with separate pre-announcement [- 3, -1], announcement [0, +1], and post-announcement [+2, +3] intervals. Average abnormal returns, cumulative abnormal returns, and cumulative average abnormal returns are used to evaluate both within-group market reactions and differences between domestic and cross-border acquisitions, with statistical inference supplemented by robustness considerations appropriate for multi-day event studies. The reconstructed evidence indicates that acquisition geography alone does not produce a statistically robust difference in Microsoft shareholder value. Domestic acquisitions exhibit mildly positive abnormal performance before announcements and comparatively stronger post-event performance, whereas cross-border transactions display a more negative post-announcement pattern. However, these effects are concentrated event days and do not translate into consistently significant cumulative wealth effects across the principal event windows. Direct comparisons likewise provide limited evidence that domestic acquisitions systematically outperform cross-border transactions.