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Article
Publication date: 11 March 2019

Nour Adel and Fadi Alkaraan

This paper focuses on the influence of overconfident managers on strategic investment acquisitions performance, by investigating the influence of key contextual factors on…

Abstract

Purpose

This paper focuses on the influence of overconfident managers on strategic investment acquisitions performance, by investigating the influence of key contextual factors on acquirers’ returns of UK domestic and cross-border acquisitions during the period 2000-2009. In this study, particular attention has been paid to management attributes (frequent acquirers vs non-frequent acquirers); method of payment (cash vs non-cash deals); the geographic scope (domestic vs cross-border deals); the type of the target (public vs private); the industry scope; and the relative size.

Design/methodology/approach

An event study is used to analyse domestic and cross-border acquisitions. The market model is used for estimating the acquirers’ abnormal returns of 1,133 domestic and cross-border acquisitions by UK firms between 1 January 2000 and 31 December 2009.

Findings

The findings reveal that acquirers with domestic targets have higher returns than cross-border targets. Infrequent acquirers generate higher returns from domestic and cross-border acquisitions than frequent acquirers. Further, acquirers that acquire domestic targets from different industrial sectors produce higher returns than acquirers with targets from the same sector. Acquirers with cash deals, private targets and high book-to-market ratio generate significant returns compared to acquirers with non-cash deals, low book-to-market ratio and public targets and that for domestic and cross-border deals. These results suggest that UK domestic and cross-border acquisitions are partially shaped by overconfident managers.

Research limitations/implications

The study has a number of limitations, including the use of the market model, the data-collection process and the limited number of contextual factors. Future research may examine a number of avenues related to the current study, including incorporating the acquiring firms’ financial characteristics.

Practical implications

The study provides a better understanding of the influence of contextual factors on the success and failure of strategic investment projects such as acquisitions. Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.

Originality/value

Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.

Details

Journal of Financial Reporting and Accounting, vol. 17 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 1 July 2003

Michael A. Hitt and Vincenzo Pisano

Cross‐border mergers and acquisitions present significant opportunities for firms wishing to diversify their activities geographically, learn new knowledge, and gain access to…

4048

Abstract

Cross‐border mergers and acquisitions present significant opportunities for firms wishing to diversify their activities geographically, learn new knowledge, and gain access to valuable resources. Cross‐border mergers and acquisitions present multiple challenges as well. These include the difficulty of evaluating target firms, cultural and institutional differences, and the liabilities of foreignness among others. We compare acquisitions to enter new markets with other market entry mechanisms (strategic alliances and greenfield ventures), and conclude with suggestions for future research to advance our knowledge of this strategy of increasing importance globally.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 1 no. 2
Type: Research Article
ISSN: 1536-5433

Keywords

Article
Publication date: 31 May 2011

Jun Ying Liu, Sui Pheng Low and Miaomiao Niu

In recent years, several high‐profile cross‐border acquisitions made by Chinese enterprises have attracted the world's attention. However, none of these acquisitions were related…

1617

Abstract

Purpose

In recent years, several high‐profile cross‐border acquisitions made by Chinese enterprises have attracted the world's attention. However, none of these acquisitions were related to Chinese construction enterprises despite their expanding role in the international construction market. The purpose of this paper is to evaluate the objectives and impediments faced by Chinese construction enterprises in cross‐border acquisitions based on existing theories and research studies.

Design/methodology/approach

Based on a literature review and the analysis of the current status of cross‐border acquisitions in China, an industry‐wide questionnaire survey was conducted to investigate the objectives and impediments of cross‐border acquisitions faced by Chinese construction enterprises.

Findings

The main objective of Chinese construction enterprises towards cross‐border acquisitions is to create new markets and to optimize the industrial structure. Although a majority of the construction enterprises demonstrated an intention for cross‐border acquisitions which is driven by their past and current overseas activities, their preparation for cross‐border acquisitions is impeded by concerns over post‐acquisition issues and a lack of knowledge and experience.

Originality/value

The paper originally contributes to a better understanding of the current status of cross‐border acquisitions by Chinese construction enterprises based on an analysis of their objectives and impediments, which will be useful for researchers and practitioners.

Details

Journal of Technology Management in China, vol. 6 no. 2
Type: Research Article
ISSN: 1746-8779

Keywords

Article
Publication date: 15 March 2011

Bikram Jit Singh Mann and Reena Kohli

This paper seeks to compare target shareholders' wealth gains in domestic and cross‐border acquisitions in India. Two existing schools of thought namely, the industrial…

3313

Abstract

Purpose

This paper seeks to compare target shareholders' wealth gains in domestic and cross‐border acquisitions in India. Two existing schools of thought namely, the industrial organizational theory and bid‐specific factors theory have been compared to identify which of these two theories affect the target shareholders' announcement wealth gains in India.

Design/methodology/approach

Standard event study methodology has been applied to compute the announcement returns for domestic and cross‐border acquisitions. Cross‐border effect is calculated to compare the value creation in the two sets of acquisitions. Furthermore, cross‐sectional regression analysis is conducted to capture the impact of bid‐related features on target shareholder's value creation.

Findings

The results indicate that both domestic and cross‐border acquisitions have created value for the target company shareholders on the announcement. Nonetheless, the analysis of cross‐border effect as well as regression analysis makes it evident that value creation is higher for domestic acquisitions as compared to cross‐border acquisitions due to the influence of various bid‐specific factors. Thus, in India, bid‐related variables are the fundamental drivers of the target's announcement wealth gains irrespective of the nationality of the acquirer.

Originality/value

The paper extends the discussion on the target's wealth creation in domestic and cross‐border acquisitions by segregating the existing literature into two schools of thoughts namely, the industrial organizational school and bid‐specific factors school in an emerging economy like India. Moreover, various reasons specific to Indian mergers and acquisitions have been forwarded to explain the subdued market reaction to cross‐border acquisitions.

Details

International Journal of Commerce and Management, vol. 21 no. 1
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 9 March 2021

Qi Yue, Ping Deng, Yanyan Cao and Xing Hua

Post-acquisition control is a crucial factor affecting acquisition performance. We investigate how post-acquisition control strategy affects cross-border acquisition performance…

Abstract

Purpose

Post-acquisition control is a crucial factor affecting acquisition performance. We investigate how post-acquisition control strategy affects cross-border acquisition performance of Chinese multinational enterprises (MNEs) through a configurational perspective.

Design/methodology/approach

Based on 70 cross-border acquisition cases by Chinese MNEs, we adopt fuzzy-set qualitative comparative analysis (fsQCA) to study the combined effects of strategic control, operational control, institutional distance, cultural distance, relative capacity and business relatedness on the cross-border acquisition performance.

Findings

On the basis of fuzzy set analysis of multiple interdependent factors, we identify six configurations that are conductive to achieving high cross-border acquisition performance and two configurations that relate to the absence of high performance, thus shedding light on the casually complex nature of performance drivers of acquisitions.

Originality/value

This study provides a holistic, configurational approach to investigating cross-border acquisition performance by emerging market firms. Our results provide some compelling evidence that accounts for the causal complexity of post-acquisition control strategies and acquisition outcomes in the context of emerging economies.

Article
Publication date: 23 December 2020

Slađana Savović and Predrag Mimović

The purpose of this paper is to explore the effects of cross-border acquisitions on the efficiency and productivity of acquired companies in the cement industry in the context of…

Abstract

Purpose

The purpose of this paper is to explore the effects of cross-border acquisitions on the efficiency and productivity of acquired companies in the cement industry in the context of a transitional economy.

Design/methodology/approach

The Data Envelopment Analysis (DEA) and Malmquist Productivity Index were used to assess the efficiency and productivity of the acquired companies over the period 2000–2018. DEA and Malmquist index are combined with bootstrapping to perform succinct statistical inferences for determining the accuracy of results. The study assesses partial efficiency and productivity of three inputs: material, capital and labour, as well as the total factor efficiency and productivity of the acquired companies in the short and long term after the acquisitions.

Findings

The research results suggest that efficiency of material, efficiency of labour and the total factor efficiency of the acquired companies are higher after the acquisitions than before, while efficiency of capital is lower. In addition, the results show that the acquisitions had a positive impact on total factor productivity of the acquired companies.

Practical implications

The results of this study have practical implications for managers, especially for policy-makers and industry analysts in deciding whether to encourage or discourage cross-border acquisitions in transitional economies.

Originality/value

The study contributes to a better understanding of the impact of cross-border acquisitions on efficiency and productivity of acquired companies in the manufacturing industry. Research in transitional economies related to subject matter is limited, and this study is the first empirical investigation of the effect of cross-border acquisitions on the efficiency and productivity in the cement industry in Serbia by applying the Data Envelopment Analysis.

Details

International Journal of Productivity and Performance Management, vol. 71 no. 4
Type: Research Article
ISSN: 1741-0401

Keywords

Article
Publication date: 1 March 2022

Abrahim Soleimani and K. Michelle Yang

Drawing on the institutional theory and organizational learning literature, the purpose of this study is to investigate the relationship between prior acquisition experience and…

Abstract

Purpose

Drawing on the institutional theory and organizational learning literature, the purpose of this study is to investigate the relationship between prior acquisition experience and the duration of the deal completion stage in cross-border acquisitions and the impacts of the quality of business institutions in the host country and the institutional distance between home and host countries on this relationship.

Design/methodology/approach

This study uses the sixth wave of mergers and acquisitions, the first truly global wave that covered a wide range of institutional settings, to test the hypotheses. Using a panel data regression method, it analyzes 8,175 cross-border acquisitions from 2003 to 2009, conducted by acquirers from 47 advanced and emerging economies in 56 advanced and emerging economies.

Findings

This study finds that host-country acquisition experience has more impact on shortening deal completion duration. Home-country acquisition experience is more effective in host countries with less developed business institutions than in those with more developed ones. The results of this study show that the quality of business institutions in the host country and the institutional distance between the home and host countries amplify or attenuate the effect of past acquisition experiences, depending on their origin and the quality of business institutions and institutional distance of where they are used.

Originality/value

The growing popularity of cross-border acquisitions among emerging country acquirers calls for a systemic study of the cross-border acquisition process. One of the critical and less understood stages in this process is the deal completion stage. This study examines how the institutional environments in the home and host countries impact the effectiveness of past acquisition experiences on shortening this stage.

Article
Publication date: 28 October 2019

Ching-Chiu Hsu, Jeong-Yang Park and Yong Kyu Lew

In cross-border mergers and acquisitions (M&As), acquirers often fail to achieve the expectations they held when they made the M&A deals. This paper aims to propose that the risks…

1469

Abstract

Purpose

In cross-border mergers and acquisitions (M&As), acquirers often fail to achieve the expectations they held when they made the M&A deals. This paper aims to propose that the risks of cross-border M&As can be mitigated by building and cultivating organizational resilience as a prime means of risk management.

Design/methodology/approach

The research examines risks associated with cross-border M&A and how such risks can be mitigated by developing resilience. It presents dual cases of acquisitions of the biggest branded mobile phone manufacturer in Taiwan.

Findings

The authors find that the acquirer faces multiple risks in cross-border M&A transactions, including financial, strategic and organizational, and process risks that arise from misalignment between the goal of the M&As and the post-acquisition performance of the target firms.

Originality/value

The research provides theoretical insights on organizational resilience and how it can mitigate the specific risks involved in cross-border M&As, thereby developing coherent organizational resilience processes.

Details

Multinational Business Review, vol. 27 no. 4
Type: Research Article
ISSN: 1525-383X

Keywords

Article
Publication date: 9 September 2014

P.C. Narayan and M. Thenmozhi

The purpose of this paper is to contribute to M&A literature by explicitly investigating whether cross-border acquisitions involving emerging markets, either as acquirers or as…

2600

Abstract

Purpose

The purpose of this paper is to contribute to M&A literature by explicitly investigating whether cross-border acquisitions involving emerging markets, either as acquirers or as targets, create value and how is the performance outcome in such acquisitions impacted by deal-specific characteristics.

Design/methodology/approach

This study uses industry-adjusted operating performance to measure acquisition gains, the Wilcoxon signed rank test to examine value creation potential and OLS regression to evaluate the impact of deal characteristics on acquisition gains.

Findings

The authors find very pronounced value destruction when emerging market firms acquire targets in developed markets, the adverse outcome being further aggravated when the mode of acquisition is “tender offer” rather than a “negotiated deal”. On the other hand, when developed market firms acquire targets from emerging markets, there is an even chance of value creation, the outcome being favourably influenced by the pre-acquisition performance of the two firms, relative size of the target and cash (not stock-swap) as the mode of payment.

Originality/value

The findings from this paper offer an important, statistically significant explanation on the value creation potential and the impact of deal characteristics on post-acquisition operating performance in cross-border acquisitions involving emerging market firms. This finding assumes immense significance, given the rapidly changing landscape of global M&A, witnessed through a continuous rise in the volume and value of cross-border acquisitions involving emerging market firms.

Details

Management Decision, vol. 52 no. 8
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 26 January 2023

Ralf Bebenroth and Kashif Ahmed

In this paper, the knowledge-based view of the firm is applied to theoretically elucidate and empirically examine the influence of target industry growth on premium payments in…

Abstract

Purpose

In this paper, the knowledge-based view of the firm is applied to theoretically elucidate and empirically examine the influence of target industry growth on premium payments in cross-border acquisitions. This study aims to extend internally driven Mergers and Acquisitions research efforts of acquirers to industry contingencies of targets by analyzing cross-border acquirers located within the group of seven (G7) countries.

Design/methodology/approach

This study’s investigation covers 209 cross-border acquisitions from 2012 to 2019 undertaken by firms located within the G7 countries. This paper used generalized estimation equations method to test the hypotheses applying Gaussian distribution for the dependent variable, an identity link function, exchangeable correlation structure and robust standard errors.

Findings

This study’s results reveal that target industry growth determines premiums. Furthermore, this study shows that acquirer industry growth, as well as acquirer slack, moderates this relationship. This study is built on the notion that industry contingencies influence premiums even when target firms are based in foreign countries.

Originality/value

To the best of the authors’ knowledge, unlike other studies, this is the first to explicitly focus on premiums for multiple cross-border acquisitions by hand selecting nine years of industry sale figures for 53 industries separately in each of the G7 nation countries (leading to 371 separate downloads of data samples). This study contends that industry growth of cross-border targets matters for premium payments.

Details

Multinational Business Review, vol. 31 no. 2
Type: Research Article
ISSN: 1525-383X

Keywords

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