The 2007–2008 Global Financial Crisis, and Cross-border Mergers and Acquisitions

Abstract

Many interdisciplinary studies of the 2007–2008 global financial crisis examine the causes of crisis, corporate governance and firm value, stock market efficiency, new firm registration, macroeconomic performance, and compare this crisis to previous crises. However, we do not find conceptual (empirical) studies that study foreign mergers or acquisitions with respect to the financial crisis. In this exploratory study, we perform an investigation using the UNCTAD’s dataset of worldwide cross-border mergers and acquisitions (CB-M&As). We select 26 countries and employ the adjusted event-study method to find significant difference between the means of pre-crisis period (2004–2006) and post-crisis period (2008–2010) for both sales and purchases in three variables, namely, number of deals, deal value, and average deal value. Our results show that the 2007–2008 global financial crisis has negatively affected both CB-M&A sale and purchase transactions all over the world from 2008 to 2009. We found, however, that after the crisis period, emerging market countries have taken advantage of the attractive asset prices in developed countries and increased their foreign acquisitions. Lastly, we offer “crisis-related CB-M&A propositions” that would facilitate future hypotheses testing, empirical studies, and policy-making research.

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