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Acquirers and Financial Constraints: Theory and Evidence from Emerging Markets

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How do financial frictions shape the set of acquirers, how much they acquire, and how long they keep ownership? To address these questions, we develop a tractable model of M&As whereby acquirers and targets emerge endogenously due to differences in liquidity. Financial crises lead to selection effects among acquirers that result in larger acquired stakes and more persistent ownership. We present evidence consistent with the predictions of the model in a dataset of domestic and cross-border M&As from emerging markets. Financially constrained domestic firms in crisis-hit countries acquire 11-15% more ownership. The survival rate of these acquisitions is 19-24% higher.

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  • Rahul Mukherjee & Christian Proebsting, 2017. "Acquirers and Financial Constraints: Theory and Evidence from Emerging Markets," IHEID Working Papers 21-2017, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp21-2017
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    1. Alquist, Ron & Berman, Nicolas & Mukherjee, Rahul & Tesar, Linda L., 2019. "Financial constraints, institutions, and foreign ownership," Journal of International Economics, Elsevier, vol. 118(C), pages 63-83.
    2. José Manuel Mansilla-Fernández & Juliette Milgram-Baleix, 2023. "Working capital management, financial constraints and exports: evidence from European and US manufacturers," Empirical Economics, Springer, vol. 64(4), pages 1769-1810, April.

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    More about this item

    Keywords

    domestic mergers and acquisitions; cross-border mergers and acquisitions; financial crisis; financial constraints; capital reallocation;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G01 - Financial Economics - - General - - - Financial Crises
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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