Cross-Border M&As Involving an Emerging Market

Byoung-jin Kim and Jin-young Jung

Emerging Markets Finance and Trade, 2016, vol. 52, issue 11, 2454-2472

Abstract: This study analyzes Korean firms’ motives for cross-border M&As, Asia’s representative emerging capital market, from the perspective of financial attributes, and defines the effects of group attributes of cross-border M&As on the wealth of acquiring firms’ shareholders. As for the group attributes of cross-border M&As, shareholders of small firms with high ROA do not like cross-border M&As, because the shareholders of small acquiring firms with sufficient internal growth factors are reluctant to transfer their present wealth to shareholders of foreign target firms. We also verify that the diversification effect with regard to cross-border M&As is accompanied by the diversification discount, but that firms with ample internal funds due to their high ROA like entering into new industries through cross-border M&As. Lastly, when target companies are listed in countries with highly uncertain GDP growth rates, acquiring firms’ value decreased.

Date: 2016
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DOI: 10.1080/1540496X.2016.1207167

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