Determinants of acquisitions: an Indian perspective

Arpita Agnihotri

Management Research Review, 2013, vol. 36, issue 9, 882-898

Abstract: Purpose - The purpose of this paper is to identify and investigate firm level determinants of the firm's decision on acquisition strategy. Design/methodology/approach - A total of 360 firms across fast growing sectors in India, namely automobile, FMCG and pharmaceutical were selected for six years, i.e. from 2004‐2010, thus making a sample of 360 firms. Hypothesis were tested using panel logit regression and instrumental IV variable regression. Findings - Findings suggest that earnings volatility and business group affiliation are statistically significant determinants of the firm's acquisition decision. Earnings volatility follows inverted “U” curvilinear relationship with a firm's propensity to bid for acquisition and business group affiliation is a quasi moderator, i.e. has both direct and moderating impact on earnings volatility and acquisition likelihood relationship. Research limitations/implications - Out of several manufacturing and service sectors only three fastest growing sectors are selected. Moreover, though study has been conducted in emerging market, i.e. India. For further generalization, other emerging economies should have also been selected. However, availability of data restricts scope of study. Practical implications - Managers can look at strategies like acquisition to reduce their volatility. However, they have to make this decision in a prudent manner as acquisition itself is a risky strategy. Moreover, managers of stand alone firms should seek to find solutions of resource scarcity. Originality/value - Determinants mentioned above have not been investigated earlier with respect to acquisition decision especially in emerging market context.

Keywords: Acquisitions and mergers; Volatility; Business group; Logistic regression; Emerging markets; India (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eme:mrrpps:v:36:y:2013:i:9:p:882-898

DOI: 10.1108/MRR-04-2012-0077

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