The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises

Zhu Zhang, Marjorie A. Lyles and Changqi Wu

International Business Review, 2020, vol. 29, issue 4

Abstract: This study builds on insights from mergers and acquisitions (M&A) studies and the perspective that stock market performance is affected by the M&A strategies of firms. Past studies show that acquisitions are an effective way to exploit existing knowledge and explore new possibilities. We argue that stock market performance can be a response to exploration/exploitation strategies in the context of cross-border M&As by emerging market multinationals. Based on cross-border M&A data of Chinese multinationals, we find that exploration-oriented acquisitions have worse stock market performance than exploitation-oriented acquisitions. Furthermore, we find support for our premise that acquiring firms can reduce the risk of exploration-oriented acquisitions by having more high-discretion slack resources or by maintaining a high level of equity share of the target firm. In addition, acquiring firms perform better if they conduct exploration-oriented acquisitions in related industries. Our results contribute to a better understanding of exploration and exploitation in the context of M&As.

Keywords: Exploration-oriented acquisitions; Exploitation-oriented acquisitions; Performance; Emerging market MNEs; China (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (16)

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DOI: 10.1016/j.ibusrev.2020.101707

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