Does Growth & Quality of Capital Markets drive Foreign Capital? The case of Cross-border Mergers & Acquisitions from leading Emerging Economies
AbstractIs there any interrelationship between firm level FDI in the form of cross border Mergers & Acquisitions and capital markets growth and quality? We addressed this question using panel data of cross border M&A for nine emerging economies. Our study period goes from 1987 to 2006. We find that the stock market variables, viz., capitalization and value addition encourage the number of deals and value of cross border Mergers & Acquisitions. However, the association with regulatory and financial reforms is much stronger and robust. We then interact both the stock market variables with financial and regulatory reforms variables only to find much stronger results. The coefficients proved to be higher than other variables, suggesting that higher reforms in capital markets could increase firm level FDI. Moreover, the results are found to be extremely robust when we replace stock market variables with squared values of the same, reiterating the fact that larger is the growth, greater is the inflow of firm level FDI in the form of cross border Mergers & Acquisitions.
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Bibliographic InfoPaper provided by Turkish Economic Association in its series Working Papers with number 2008/5.
Length: 25 pages
Date of creation: 2008
Date of revision: Mar 2008
Financial Markets; Cross border M&A & Emerging Economies;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
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