When the Poor Buy the Rich: New Evidence on Wealth Effects of Cross-Border Acquisitions

Hong-Hai Ho, Thi-Hanh Vu, Ngoc-Tien Dao, Tung Ho and Quan Hoang Vuong
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Hong-Hai Ho: Faculty of Finance and Banking, Foreign Trade University, 91 Chua Lang Street, Hanoi 100000, Vietnam
Thi-Hanh Vu: Institute of Economics and International Business, Foreign Trade University, 91 Chua Lang Street, Hanoi 100000, Vietnam
Ngoc-Tien Dao: Institute of Economics and International Trade, Foreign Trade University, 91 Chua Lang Street, Hanoi 100000, Vietnam

JRFM, 2019, vol. 12, issue 2, 1-15

Abstract: The growing trend of merging and acquisition (M&A) investments from emerging to developed market economies over the last two decades motivates the question on the long-run effects of M&A on the wealth of emerging markets. This paper contributes to the current literature on cross-border M&A (CBMA) by focusing on the long-term effects of this event on the bidder’s stock return in emerging markets. To address the challenges of finding an accurate measure for the effects, this study applies the propensity score matching framework in tandem with difference-in-differences (DID) on a comprehensive dataset over the 1990–2010 period. The analyses show evidence of systematic detrimental impacts of cross-border M&A on shareholders’ welfare in the long run, to a certain extent, diverging from the existing literature, which mainly highlights the positive effects for certain types of M&A. The striking finding is that such strong negative effects remain persistent even when various factors previously known as capable of suppressing underperformance are considered. Our study is in line with the growing landscape of cross-border mergers and acquisitions from the “poor” to the “rich” countries.

Keywords: M&A; wealth effects; propensity score matching; emerging markets (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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