Working Paper: NBER ID: w10872
Authors: Anusha Chari; Paige P. Ouimet; Linda L. Tesar
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.
Keywords: No keywords provided
JEL Codes: F3; G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Majority control in R&D-intensive industries (L59) | pronounced gains from acquisitions (G34) |
| Cross-border M&A transactions (F23) | significant value creation for acquirers and targets (G34) |
| Stock market anticipates value creation (G10) | significant gains for shareholders (G34) |
| Acquisition announcement (G34) | statistically significant increase in announcement returns (G14) |
| Acquiring majority control (G34) | increase in joint returns (I26) |
| Majority control transfer (D72) | value gains for acquirers and targets (G34) |