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Emerging country cross-border acquisitions: Characteristics, acquirer returns and cross-sectional determinants

  • Bhagat, Sanjai
  • Malhotra, Shavin
  • Zhu, PengCheng
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    What are the important characteristics of cross-border acquisitions (CBAs) by firms from emerging countries and do these acquisitions create market value for the acquirers? Using a unique and a manually collected dataset, we identify 698 CBAs made by emerging country firms during the period January 1991 through December 2008. Targets tend to be small (by U.S. transaction value measures) -- the median ranging between $10Â million and $40Â million (in 2008 dollars). However, from 2000 to 2008, 24 acquisitions were worth more than a billion dollars each. Emerging country acquirers experience a positive and a significant market response of 1.09% on the announcement day. Additionally, in the cross-section, acquirer returns are positively correlated with (better) corporate governance measures in the target country. The positive announcement return and the cross-sectional relation between these returns and governance measures are consistent with Martynova and Renneboog's (2008) and Khanna and Palepu's (2004) bootstrapping hypothesis: the acquirer voluntarily bootstraps itself to the higher governance standards of the target -- resulting in a positive valuation impact for the acquirer.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1566014111000203
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    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 12 (2011)
    Issue (Month): 3 (September)
    Pages: 250-271

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    Handle: RePEc:eee:ememar:v:12:y:2011:i:3:p:250-271
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620356

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