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Acquiring Control in Emerging Markets: Evidence from the Stock Market

Anusha Chari (), Paige P. Ouimet and Linda Tesar ()

No 10872, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When firms from developed markets acquire firms in emerging markets, market-capitalization-weighted monthly joint returns show a statistically significant increase of 1.8%. Panel data estimations suggest that the value gains from cross-border M&A transactions stem from the transfer of majority control from emerging-market targets to developed market acquirers' joint returns range from 5.8% to 7.8% when majority control is acquired. Announcement returns for acquirer and target firms estimate the distribution of gains and show a statistically significant increase of 2.4% and 6.9%, respectively. The evidence suggests that the stock market anticipates significant value creation from cross-border transactions that involve emerging-market targets leading to substantial gains for shareholders of both acquirer and target firms.

JEL-codes: F3 G3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-com and nep-fin
Date: 2004-11
Note: IFM AP
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