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

Sanjai Bhagat, Shavin Malhotra and PengCheng Zhu

Emerging Markets Review, 2011, vol. 12, issue 3, 250-271

Abstract: 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.

Keywords: Cross; border; acquisitions; Governance; Emerging; market; acquirers; Event; study (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (66)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:12:y:2011:i:3:p:250-271

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