The Short- and Long-Term Value Gains to Acquirers of Emerging Market Targets in Mergers and Acquisition Deals

Emmanuel Okofo-Dartey and Lungile Ntsalaze ()
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Lungile Ntsalaze: University of South Africa, South Africa

Eurasian Journal of Economics and Finance, 2021, vol. 9, issue 1, 1-18

Abstract: This study investigates whether the acquisition of targets from the emerging markets impacts the short-term and long-term value gains of these targets' acquirers in terms of their profitability and growth opportunities. The study uses firm-level data of 93 listed acquirers of targets from the emerging markets sourced from the Bloomberg Terminal from 2003 to 2018. It employs the difference generalized method of moments (GMM) for analysis. This dynamic panel estimation method takes care of endogeneity problems, omitted variables, and error measurements. The study reveals that, broadly, the acquirers' profitability levels improve in the short-term after merger and acquisition (M&A) deals. This improvement in the acquirers' profitability levels occurs in the 1st, 4th and 5th year periods within the short-term after their M&A transactions are completed. Regarding growth opportunities, acquirers of targets from the emerging markets experience both negative and positive returns on their short-term growth opportunities. However, they experience significant positive returns on their growth opportunities in the long-term. Our paper complements and contributes to the body of knowledge on international market entry and have implication for potential acquirers interested in investment opportunities in the emerging markets.

Keywords: Short-term; Long-term; Acquirers; Targets; Profitability; Growth Opportunities (search for similar items in EconPapers)
Date: 2021
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