Ownership participation of cross-border mergers and acquisitions by emerging market firms

Monica Yang

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International Business and FDI Corporate Finance and Governance International Student and Expatriate Challenges

Abstract

Purpose – The purpose of this paper is to adopt a multi-level approach to investigate what factors shape the content of emerging market firms’ foreign market entry decisions, particularly the ownership participation in cross-border mergers and acquisitions (M&As). In addition, the author would like to know if companies from emerging markets that possess higher (or lower) ownership in cross-border M&As receive higher valuation in the market. Design/methodology/approach – Using panel data of cross-border M&As by emerging market firms from 2000 to 2012, the author tests the hypothesized effects of the independent variables on the level of ownership participation; and uses a standard event study methodology to assess the market reaction of a particular cross-border M&A deal. Findings – The author finds that a country-level factor (institutional distance), an industry-level factor (industry unrelatedness) and a firm-level factor (board concentration) have significant impact on ownership participation in cross-border M&As. The author also finds that investors do give high valuation to those emerging market firms that chose high ownership participation in cross-border M&As. However, the author did not finds the support for the relationship between ownership participation and cultural distance. Neither did the author finds the support for the relationship between ownership participation and board independence. Originality/value – This study enhances the understanding of conditions under which the level of ownership participation in cross-border M&As would increase (decrease) and how the market reacts to high (low) ownership participation of cross-border M&As by emerging market firms.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields 1990Institutions, Institutional Change and Economic Performance 2004The iron cage revisited institutional isomorphism and collective rationality in organizational fields 1991Institutions, Institutional Change and Economic Performance 1970The Market for "Lemons": Quality Uncertainty and the Market Mechanism 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 1995Institutions and organizations

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2020Institutional distance and cross-border M&A performance: A dynamic perspective 2021Cross-border acquisition performance of emerging market multinational enterprises: The moderating role of state-ownership and acquisition experience 2020The effect of interlocking directorates on mergers and acquisitions in Brazil

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