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Partial acquisitions in emerging markets: A test of the strategic market entry and corporate control hypotheses

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  • Zhu, PengCheng
  • Jog, Vijay
  • Otchere, Isaac
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    Abstract

    In this paper, we examine the motivations of acquirers undertaking partial acquisitions in emerging markets by testing two competing hypotheses: the market for corporate control hypothesis and the market entry hypothesis. We find that targets of cross-border acquisitions outperform targets of domestic acquisitions in the pre-acquisition period. While cross-border acquisitions have no significant impact on target firms' operating performance, targets of domestic acquisitions experience significant improvements in operating performance and substantial changes in ownership structure after the acquisition. The evidence suggests that domestic partial acquisitions in emerging markets serve as a market for corporate control, while cross-border partial acquisitions are motivated by the strategic market entry rationale.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 17 (2011)
    Issue (Month): 2 (April)
    Pages: 288-305

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    Handle: RePEc:eee:corfin:v:17:y:2011:i:2:p:288-305

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: Emerging markets Corporate control Partial acquisitions Cross-border Information asymmetry Market entry;

    References

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    Cited by:
    1. Joze P. Damijan & Crt Kostevc & Matija Rojec, 2012. "Growing lemons and cherries? Pre- and post-acquisition performance of foreign-acquired firms in new EU member states," LICOS Discussion Papers 31812, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    2. Deshpande, Shreesh & Svetina, Marko & Zhu, PengCheng, 2012. "Analyst coverage of acquiring firms and value creation in cross-border acquisitions," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 212-229.

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