Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 5 October 2021
Issue publication date: 14 November 2023
Abstract
Purpose
The global economy has witnessed an exponential increase in cross-border acquisitions (CBAs) by emerging market companies (EMCs), demanding a relook at their internationalization strategy. The purpose of the study is to investigate whether the announcement of CBAs by EMCs creates value for the equity-holders of acquiring firms and identify factors affecting the valuation of acquiring companies.
Design/methodology/approach
The paper investigates the announcement impact of CBAs of CNX Nifty 500 Indian and SSE 380 Chinese companies. The event study analysis of 553 Indian and 125 Chinese acquisitions supports the contention that CBAs are indeed a strategic choice of EMCs for value creation.
Findings
CBAs generate positive and statistically significant abnormal returns for shareholders of both Indian and Chinese acquirers. The markets, however, differ in terms of their motivations; country-level factors have been observed to exert significant influence on the returns of Indian acquirers. Indian companies experience larger value creation on acquiring firms established in developed, institutionally closer and/or economically distant markets. The findings support the asset-seeking motive of Indian companies.
Originality/value
The research work contributes to the evolving stream of CBAs literature with a focus on the globalization strategies of EMCs. The present study is a modest attempt to lay the foundation for a new theoretical framework (asset-seeking perspective) of overseas acquisitions from emerging economies. The existing studies on emerging economies have emphasized, in isolation, either Indian CBAs or international acquisitions by Chinese firms. Being so, the study is unique and original in the sense that it is a comparative study of India and China.
Keywords
Acknowledgements
The infrastructural support provided by the FORE School of Management, New Delhi (India) is greatly acknowledged by the first author.
Citation
Jain, S., Kashiramka, S. and Jain, P.K. (2023), "Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies", International Journal of Emerging Markets, Vol. 18 No. 9, pp. 3116-3137. https://doi.org/10.1108/IJOEM-09-2019-0730
Publisher
:Emerald Publishing Limited
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