Cross-country determinants of ownership choices in cross-border acquisitions: Evidence from emerging markets

Dang, Man; Henry, Darren; Nguyen, Manh Toan; Hoang, Viet Anh

doi:10.1016/j.mulfin.2018.01.001

Cited by 25 publications

(21 citation statements)

References 73 publications

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“…This is particularly true for international investment activities in the form of cross-border takeovers, for which there is a high risk of information asymmetry as well as problematic differences in national culture, regulations, institutional arrangements, accounting standards, and tax rules (Shimizu et al 2004;Dikova, Sahib, and Van Witteloostuijn 2010;Dikova and Sahib 2013;Lawrence, Raithatha, and Rodriguez 2021). 2 Similar extant literature emphasizes the important role of institutional characteristics in merger and acquisition activities (Bris and Cabolis 2008;Bhagat, Malhotra, and Zhu 2011;Barbopoulos, Paudyal, and Pescetto 2012;Lebedev et al 2015;Dang et al 2018). These studies suggest that higher levels of cross-border activity are likely in countries which have higher quality investor protection.…”

Section: Institutional Environment and Acquisitionsmentioning

confidence: 90%

“…The value of cross-border acquisitions grew dramatically after the Global Financial Crisis (GFC), reaching US$694 billion in 2017 (UNCTAD 2018). Engaging in cross-border acquisitions is a key strategic and structural decision that enables bidders to exercise their growth opportunities, expand into international markets and leverage their core competences and competitive advantages (Vermeulen and Barkema 2001;Ghauri and Buckley 2003;Cheng and Leung 2004;King et al 2004;Rossi and Volpin 2004;Chen 2008;Haleblian et al 2009;Bhagat, Malhotra, and Zhu 2011;Claessens and Yurtoglu 2013;Kim and Lu 2013;Dang et al 2018). Cross-border acquisitions also bring additional risk considerations owing to varying cross-country institutional settings, and the choice of payment method has been proposed as one means for bidding and target companies to potentially manage these risks (Fuller and Glatzer 2003).…”

Section: Introductionmentioning

confidence: 99%

“…These risks can be mitigated to some degree through extensive due diligence work or carefully planned execution strategies. External risk factors associated with economic activity, government policy settings or financial market conditions at the country-level are much more difficult, or impossible, to directly influence at the transaction level, while they may strongly affect acquisition gain and success outcomes (Chen 2008;Dang et al 2018). Further, since cross-border acquisitions are more complex in nature due to the country-specific uncertainty which arises when dealing with a target firm in a foreign market, choice of payment alternatives (i.e.…”

Section: Introductionmentioning

confidence: 99%

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Country uncertainty, power distance, and payment methods in acquisitions

Dang

Hoang

Jones

et al. 2021

The European Journal of Finance

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This study examines the impact of country-specific uncertainty on the choice of payment method in international acquisitions. Our results show a negative association between the level of target country-specific uncertainty and cash transactions. Specifically, when the host country experiences a high level of country uncertainty, acquirers are more likely to choose non-cash transactions in which acquiring firms can issue their own equity to the target firm as part or all of the purchase consideration of the deal. The result is robust to alternative tests and analysis of subsamples. We also find that differences in uncertainty between host and home countries are informative of bidders' payment choices. Further, we find that the negative relation between target countryspecific uncertainty and cash payment weakens when there are larger differences in power distance between host and home countries. Our findings provide recommendations for policy-making bodies, and have implications for firm managers making corporate restructuring decisions.

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Section: Institutional Environment and Acquisitionsmentioning

confidence: 90%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Country uncertainty, power distance, and payment methods in acquisitions

Dang

Hoang

Jones

et al. 2021

The European Journal of Finance

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“…This brings us to the unique benefits that a majority control provides to the foreign investors. By acquiring more than 50% of local firms' shares, the foreign investors with majority control face minimal to no resistance when taking any major or minor decisions related to their target local firm (Dang et al, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

Individual Investments Biased by the Size of a Foreign Investor: An Experimental Study

Umer

Ahmed

Jadoon

2021

OMEE

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The field of behavioral finance has actively researched behavioral elements influencing the choices of individual investors. This study also contributes to the behavioral finance and examines the effect of an increase in a foreign firm’s partial ownership in a domestic firm on the local individual investments in that domestic firm. Specifically, using a controlled lab experiment the study examines the investments of Pakistani individual investors between a purely Pakistani firm and a Pakistani firm with three different levels of Chinese ownership (portfolio, minority, majority). The experimental results show that with reference to Chinese minority ownership in a Pakistani firm, the potential investors are 47% (61%) less likely to invest in a Pakistani firm with Chinese portfolio (majority) ownership than in a purely Pakistani firm. The study uncovers an important non-monetary factor in the form of a foreign firm’s partial ownership that can significantly influence the choices of individual investors. It also makes an important contribution to the growing literature on the Chinese foreign investments specifically in Pakistan by exploring how potential individual Pakistani investors are likely to react to an increase in Chinese investments in Pakistani firms.

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“…In this section the previous studies will be reviewed in the chronological order which have been carried out about mergers and acquisitions in the emerging countries. In a most recent study, Dang, Henry, Nguyen, and Hoang (2018) between acquirers and targets also play significant role in complete cross-border acquisitions in the emerging countries.…”

Section: Effects Of Mergers and Acquisitions (Manda) On The Abnormal Returns Of The Acquirers And Targets In Developing Countriesmentioning

confidence: 99%

Cross-border acquisitions by emerging countries multinationals : short-term abnormal returns

Chaudhry¹

2021

Preprint

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The current study investigates short-term abnormal returns of emerging countries multinationals acquirers on cross-border acquisitions in other emerging and developed countries. For this objective, the current study employs market return model approach and then uses the event study to estimate short-term abnormal returns of the emerging countries acquirers and used daily data for the period of January 01, 2010 to March 31, 2018. Statistical results lead to conclude that shareholders of the emerging countries acquirers earn short-term positive and statistically significant abnormal returns on cross-border acquisitions in other emerging countries. Similarly, results conclude that shareholders of the acquiring firms of the emerging countries earn short-term positive and statistically significant returns on cross-border acquisitions in developed countries. These return patterns of the emerging countries multinational companies (EMNCs) on cross-border acquisitions in developing and developed countries are not like abnormal short-term abnormal return patterns of the developed countries multinational companies (MNCs) on cross-border acquisitions. The current study also concludes that factors such as political stability has inverse, legal framework inverse though insignificant, size of emerging countries acquirers direct, leverage negative, and ownership no impact on short-term abnormal returns of EMNCs proxied by CAR (-1, 1) on cross-border acquisitions in other emerging countries. Moreover, concludes that factors such as political stability, legal framework, and size of emerging countries acquirers have inverse, leverage direct, ownership has no effect on short-term abnormal returns of EMNCs proxied by CAR (-1, 1) on cross-border acquisitions in developed countries. The implications of the current study are of great importance both for the acquirers and investors of the emerging countries. Therefore, investors can insight short-term abnormal return patterns on the announcement of cross-border acquisitions by the EMNCs in other emerging and developed countries. Further, implications of the current study can help to anticipate response of the market participants on the news of cross-border acquisitions by the EMNCs in developing and developed countries. Henceforth, keeping in view the short- term positive abnormal pattern of the acquirers of the emerging countries multinationals on cross-border acquisitions, smart investment decisions can be made to achieve synergies, efficiencies, access on skilled labor, access on low cost capital, higher sales, and access on technology that will ultimately increase the wealth of the shareholders. Limitations of the current study are to cross-border acquisitions of the emerging countries multinationals in developing and developed countries, but more research work can be undertaken to investigate the impact of industry-wise cross-border acquisitions. Also, current study is limited to examine the cross-border acquisitions of the emerging countries multinationals of the public companies in other developing and developed countries, however more empirical research can be undertaken to examine the effects of cross-border acquisitions in private sectors. More empirical research can be undertaken by adding the impact of cross-border mergers by the emerging countries multinationals on short-term abnormal returns in developing and developed countries. Similarly, research work can be undertaken to examine the long run impact of the cross-border mergers and acquisitions by the emerging countries multinationals on the efficiencies and profitability.

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Cross-country determinants of ownership choices in cross-border acquisitions: Evidence from emerging markets

Cited by 25 publications

References 73 publications

Country uncertainty, power distance, and payment methods in acquisitions

Country uncertainty, power distance, and payment methods in acquisitions

Individual Investments Biased by the Size of a Foreign Investor: An Experimental Study

Cross-border acquisitions by emerging countries multinationals : short-term abnormal returns

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