World Market for Mergers and Acquisitions
AbstractDespite the fact that one-third of worldwide mergers involve firms from different countries, the vast majority of the academic literature on mergers studies domestic mergers. What little has been written about cross-border mergers has focused on public firms, usually from the United States. Yet, the vast majority of cross-border mergers involve private firms that are not from the United States. We provide an analysis of a sample of 56,978 cross-border mergers occurring between 1990 and 2007. We first characterize the patterns of who buys whom: Geography matters, with firms being much more likely to purchase firms in nearby countries than in countries far away. Purchasers are usually but not always from developed countries and they tend to purchase firms in countries with lower accounting standards. A significant factor in determining acquisition patterns is currency movements; firms tend to purchase firms from countries relative to which the currency of the acquirers country has appreciated. In addition, economy-wide factors reflected in the countrys stock market returns lead to acquisitions as well. Both the currency and stock market effect could suggest either misvaluation or wealth explanations. Our evidence is more consistent with the wealth explanation than the misvaluation explanation.
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Bibliographic InfoPaper provided by Institute for Financial Research in its series SIFR Research Report Series with number 75.
Length: 43 pages
Date of creation: 20 Sep 2010
Date of revision: 01 Jun 2011
Publication status: Forthcoming as Erel, Isil, Rose C. Liao and Michael S. Weisbach, 'World Market for Mergers and Acquisitions' in Journal of Finance.
Note: Please find an updated version on http://fisher.osu.edu/fin/faculty/weisbach/wpapers.html
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Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden
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More information through EDIRC
Mergers; Currency movements; Market movements; Valuation;
Other versions of this item:
- Erel, Isil & Liao, Rose C. & Weisbach, Michael S., 2009. "World Markets for Mergers and Acquisitions," Working Paper Series 2009-11, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Isil Erel & Rose C. Liao & Michael S. Weisbach, 2009. "World Markets for Mergers and Acquisitions," NBER Working Papers 15132, National Bureau of Economic Research, Inc.
- F30 - International Economics - - International Finance - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-COM-2010-09-25 (Industrial Competition)
- NEP-IFN-2010-09-25 (International Finance)
- NEP-IND-2010-09-25 (Industrial Organization)
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