World Market for Mergers and Acquisitions

Isil Erel, Rose C. Liao and Michael Weisbach
Additional contact information
Isil Erel: Ohio State University
Rose C. Liao: Rutgers University

No 75, SIFR Research Report Series from Institute for Financial Research

Abstract: Despite 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.

Keywords: Mergers; Currency movements; Market movements; Valuation (search for similar items in EconPapers)
JEL-codes: F30 G34 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010-09-20, Revised 2011-06-01
New Economics Papers: this item is included in nep-com, nep-ifn and nep-ind
Note: Please find an updated version on http://fisher.osu.edu/fin/faculty/weisbach/wpapers.html
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Forthcoming as Erel, Isil, Rose C. Liao and Michael S. Weisbach, 'World Market for Mergers and Acquisitions' in Journal of Finance.

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Related works:
Working Paper: World Markets for Mergers and Acquisitions (2009)
Working Paper: World Markets for Mergers and Acquisitions (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sifrwp:0075

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