Does market misvaluation drive cross-border M&As?

Wenxuan Huang, Weidong Xu, Donghui Li, Ling Zhao and Shijie Yang

Journal of International Financial Markets, Institutions and Money, 2024, vol. 92, issue C

Abstract: Employing a panel sample of 61,532 cross-border mergers between 2000 and 2020, we investigate the impact of market misvaluation on corporate cross-border mergers and acquisitions (CBMAs). We find that firms with higher market misvaluation launch more CBMAs and tend to pay with their overvalued stock. However, the effect of market misvaluation on CBMAs will weaken over time. CBMAs driven by high market misvaluation result in lower short-term stock returns and better long-term profitability. Cross-sectional analyses show that the impact of market misvaluation on CBMAs can be mitigated by stronger country-level uncertainty avoidance and masculinism culture, while it is more pronounced in high individualism culture. At the firm level, the monitoring role of institutional investors and analysts can mitigate the impact of market misvaluation on CBMAs. Our results remain robust in various robustness tests and after addressing endogeneity concerns.

Keywords: Market misvaluation; CBMA; Market performance; CBMA payment; National culture (search for similar items in EconPapers)
JEL-codes: G14 G15 G34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:92:y:2024:i:c:s104244312400026x

DOI: 10.1016/j.intfin.2024.101960

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