Determinants of cross-border mergers and Acquisitions (CBMAs) performance in five East Asian countries

Abstract

Ahstract-This study aims to investigate the determinants that caused the variations in the post-CBMA performance of the target firms in the five East Asian countries, namely Malaysia, Thailand, Indonesia, the Philippines and South Korea. Using a sample from 1998 to 2004, the ownership and target firms' characteristics are examined. A four-step hierarchical analysis was used with EFCFS (Excess free cash flow per share) as a dependent variable for the post CBMA performance and independent variables including characteristics of targets (pre-CBMA) and ownership characteristics of the acquired (post-CBMA). The results show that the average EFCFS improved after CBMAs. The target characteristics such as pre-CBMA performance, the size of the targets, and the business relatedness between targets and acquirers have a significant effect on EFCFS.The positive effect of foreign majority control on post CBMA performance nevertheless is contingent on the target characteristics ..

Cross-Border Mergers and Acquisition (CBMAs): A Review on Top Six ASEAN Country CBMA Players

“…Consistent with previous argument, strict regulatory environment such as complicated and lengthy administration process involving various regulatory bodies (Song et al, 2010b), financial restriction on capital outflow from a home country (Jongwanich et al, 2013) and high corporate tax rate (Nagano, 2013) hampered CBMAs. Martynova and Renneboog (2008) claimed that the governance environment of a country is an important stimuli of CBMAs.…”

“…A few studies found no significant relationship between the size and abnormal return (Bhagat et al, 2011;Cakici et al, 1996;Corhay & Rad, 2000). However, others found a positive relationship between size and cumulative abnormal return of shareholders (Basuil, 2011;Du & Boateng, 2015;Song et al, 2010a). In contrast, Martynova and Renneboog (2008) found a negative effect of firm's size on the bidder's returns.…”

“…Privatisation of firms in host country postively affected the CBMAs inflow to countries such as Mexico and Chile (Chen & Findlay, 2003), Latin America (Chari et al, 2010) and Indonesia (Song, Kueh, Abdul Rahman, & Chu, 2010b). Chen and Findlay (2003) claimed that the number of firms available for sale increase following privatisation, while Chari et al (2010) states that the privatised firms seek foreign investors, thus positively affecting CBMA inflow.…”

“…Firstly, Song et al (2010a) indicated that the government or state ownership has no significant relationship with target return, thus proposed that variation in firm's performance was not explained by the government ownership. In contrast, other studies found positive effect of government or state ownership towards bidders' return (Changqi & Ningling, 2010;Du & Boateng, 2015;Jory & Ngo, 2011;Lebedev et al, 2015).…”

“…For instance, a study by Song et al (2010b) examined target firms performance after CBMAs using Tobin's Q and found a slight improvement in firm performance following CBMAs.…”