Does payment method matter in cross-border acquisitions?

Dutta, Shantanu; Saadi, Samir; Zhu, Pengcheng

doi:10.1016/j.iref.2012.06.005

Cited by 69 publications

(41 citation statements)

References 60 publications

(91 reference statements)

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“…The shareholder wealth effect of acquisitions outside the home country is associated with higher levels of information asymmetry and agency problems compared to domestic acquisitions (Mantecon, ; Dutta et al ., ). The degree of information asymmetry and the level of agency conflict faced by a firm depend on whether it is a public firm or a private entity.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 97%

“…Dutta et al . () see stock financing as a remedy for information asymmetry associated with foreign acquisitions. Mantecon () argues that the acceptance of a bidder's stocks by the target shareholders conveys positive information to the market not only about the value of a bidder's stock, but also about their future financial performance.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…As the shares of private firms are closely held, the target shareholders become new outside block‐holders and thereby become monitors of the acquiring firms (Chang, ; Fuller et al ., ). Such monitoring benefits are very important in the acquisition of foreign targets due to location and cultural differences (Dutta et al ., ), and having a local block‐holder monitoring the activities of the newly acquired firm helps realisation of synergies in the postacquisition period (Kang and Kim, ). Sharing part of the firm's ownership with the foreign shareholders of the target firms can effectively alleviate the problem of information asymmetry in cross‐border acquisitions (Chen and Hennart, ; Reuer et al ., ).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Target's organisational form and returns to Australian bidders in cross-border acquisitions

2013

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We present large sample evidence on return performances of Australian acquirers who bid for public and private targets in cross-border acquisitions. While placing a particular emphasis on the method of payment and the shareholder protection offered by the target country, we analyse the impact of various bid, firm and foreign-acquisition-specific characteristics on bidding firms' abnormal returns. We find that Australian investors perceive crossborder acquisitions as value-creating exercises regardless of the organisational form of the target acquired. However, bidders for private targets earn higher return when the method of payment is stock and the targets are located in high investor protection countries. We further find that the abnormal returns are conditional to the relative size of the target, bid frequency, target country destination and the preacquisition financial performance of bidding firms.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 97%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Target's organisational form and returns to Australian bidders in cross-border acquisitions

2013

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“…Gugler et al (2003) do not find any significant difference between the performance of cross-border and domestic deals. While Dutta et al (2013) find positive abnormal returns for Canadian acquirers in domestic and cross-border deals and also prove that market favours cross-border acquisitions over domestic M&As. In emerging capital markets the results are also mixed.…”

Section: Hypothesesmentioning

confidence: 57%

The performance of mergers and acquisitions in emerging capital markets: new angle

Grigorieva

Petrunina

2015

J Manag Control

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Researchers have long tried to define the impact of corporate mergers and acquisitions on company performance. We contribute to the existing literature by examining the performance of M&A deals in emerging capital markets based on the economic profit model and comparing the results with ones obtained by means of traditional method-accounting studies. Examining a sample of 80 deals initiated by companies from emerging capital markets over 2003-2009, we find that M&As are value-destroying deals for the combined firms. Results from the long-run analysis prove the negative industry-adjusted differences between post-acquisition and preacquisition performance measures. The difference is equal to a significant −3.3 % for the EBITDA/sales ratio. The economic profit approach demonstrates a similar result. Economic profit has declined due to M&A deals by $4 million. We also analyze the determinants of M&A performance, such as method of payment, business similarity, and type of geographical expansion (cross-border versus local deals).

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“…It infers that the distance between home country (acquirer) and host country (target) play significant role in international deal negotiations (Chapman, 2003). Mostly, empirical studies have captured the geographic distance as the distance (in kilometers) between the capital cities of the target nation and bidder nation (e.g., Coeurdacier et al, 2009;Dutta, Saadi, & Zhu, 2013). For example, Coeurdacier et al (2009) reported that physical distance influences when European firms acquire targets in developing countries.…”

Section: (D) Tax and Taxation Issuesmentioning

confidence: 99%

Determinants of Cross-Border Mergers and Acquisitions: A Comprehensive Review and Future Direction

Reddy

2015

SSRN Journal

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The purpose of this paper is to review and summarize earlier studies analyzing the determinants of cross-border mergers and acquisitions (M&As). We primarily describe the motives of cross-border acquisitions and present the market performance for corporate control transactions over the period 1994-2013. Then, we illustrate the factors affecting cross-border investments and acquisitions in various taxonomies, namely deal-specific factors, firm-and industry-specific attributes, organizational learning and prioracquisition experience, and country-specific factors. We draw special attention to the country-specific taxonomy for various reasons include economic and financial markets environment, institutional and regulatory framework, political situation (including corruption), tax system, accounting and valuation matters, geographical factors and cultural issues. We also provide a synopsis of earlier studies addressing the diversification motive in M&A decision. We thus propose that a host-country's institutional laws and regulatory system, accounting and tax provisions, economic performance, financial markets development, investor protection, geographical, political and cultural factors distinctly affect cross-border acquisition's completion. Lastly, we outline contemporary issues in M&A research, and suggest promising areas for future exploration. JEL Classification: G34

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Does payment method matter in cross-border acquisitions?

Cited by 69 publications

References 60 publications

Target's organisational form and returns to Australian bidders in cross-border acquisitions

Target's organisational form and returns to Australian bidders in cross-border acquisitions

The performance of mergers and acquisitions in emerging capital markets: new angle

Determinants of Cross-Border Mergers and Acquisitions: A Comprehensive Review and Future Direction

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