This paper examines shareholder value gains from developed-market acquisitions of emerging-market targets. On average over the 1988-2003 period, abnormal returns for developed-market acquirers show an anomalous increase of 1.18% over a three-week event window when M&A transactions in emerging markets are announced. For a sample of 390 transactions, market-adjusted returns translate to an aggregate dollar value gain of $111.5 billion for shareholders of acquiring firms. Acquirer returns triple to 4.43% when majority control of the target is acquired. Surprisingly, the median net return (acquirer's dollar value gain/transaction value) is 1.37 with the acquisition of control. We offer a possible explanation for these puzzling findings-the data suggest that improved governance (via control rights) and the transfer of intangibles such as R&D or brand value from acquirers to targets explain the revaluation in acquirer stock prices and the resulting dollar value gains in emerging market transactions.JEL Codes: G15, G34.

We show that unexpected changes in the trajectory of COVID-19 infections predict US stock returns, in real time. Parameter estimates indicate that an unanticipated doubling (halving) of projected infections forecasts next-day decreases (increases) in aggregate US market value of 4 to 11 percent, indicating that equity markets may begin to rebound even as infections continue to rise, if the trajectory of the disease becomes less severe than initially anticipated. Using the same variation in unanticipated projected cases, we find that COVID-19-related losses in market value at the firm level rise with capital intensity and leverage, and are deeper in industries more conducive to disease transmission. These relationships provide important insight into current record job losses. Measuring US states' drops in market value as the employment weighted average declines of the industries they produce, we find that states with milder drops in market value exhibit larger initial jobless claims per worker. This initially counter-intuitive result suggests that investors value the relative ease with which labor versus capital costs can be shed as revenues decline.

Henry gratefully acknowledges the financial support of an NSF CAREER award and the Stanford Institute of Economic Policy Research (SIEPR). This is a revised version of NBER WP 8265. We thank Geert Bekaert, and Campbell Harvey for extensive comments on previous versions of this paper. We also thank

Henry gratefully acknowledges the financial support of an NSF CAREER award and the Stanford Institute of Economic Policy Research (SIEPR). This is a revised version of NBER WP 8265. We thank Geert Bekaert, and Campbell Harvey for extensive comments on previous versions of this paper. We also thank

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We use a new firm-level dataset to examine the efficiency of investment in emerging economies. In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 5.4 percentage points. Cross-sectional changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes that occur upon liberalization. Panel data estimations show that a 1-percentage point increase in a firm's expected future sales growth predicts a 4.1-percentage point increase in its investment; country-specific changes in the cost of capital predict a 2.3-percentage point increase in investment; firm-specific changes in risk premia do not affect investment.

for many thoughtful suggestions. Kevin Lai provided stellar research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Using high-frequency data this article provides evidence that, on average, central bank interventions lead to increased volatility and a widening of bid-ask spreads in the intra-day market for foreign exchange. The results also show that there is dispersion in the bid-ask spread revisions posted by individual banks in response to the central bank entering the market. The findings are consistent with predictions from standard models of market microstructure with heterogeneous agents and have implications for the market power of central banks as well as the payoff generated by trading large amounts of international reserves. Copyright 2007 The Ohio State University.