Impact of Domestic and Cross-Border Acquisitions on Acquirer Shareholders’ Wealth: Empirical Evidence from Indian Corporate

Abstract

The present paper compares the impact of domestic acquisitions and cross-border acquisitions on Indian acquirer shareholders' wealth during [2003][2004][2005][2006][2007][2008]. A segregated analysis has also been conducted to measure the impact of stake/control acquired, based on a sample of acquisitions of 268 domestic and 255 target firms across border. Further, this paper also analyses the short-run performance of percentage of stake/control acquired in both type of acquisitions. The stake/control acquired is divided into two categories: (i) complete acquisition and (ii) partial/majority control acquisition. Event study methodology has been conducted to analyse the share price performance of Indian acquirers in short-term. The findings reveal that cross-border as well as domestic acquisitions enhance shareholders' wealth of the acquirer company on the announcement. The results indicate that cross-border acquisitions generate higher returns than domestic acquisitions. Nonetheless, the segregated analysis makes it evident that the shareholders of acquiring firms of complete cross-border acquisitions earn higher abnormal returns (significant at 5 per cent). The abnormal returns are higher (though statistically insignificant) for partial/majority control domestic acquisitions.

Abnormal Return Dan Likuiditas Saham Atas Pengumuman Akuisisi

“…Dananjaya dan Wiagustini (2015) menunjukkan bahwa tidak ada perbedaan abnormal return perusahaan yang signifikan sesudah dan sebelum melakukan merger. Rani et al, (2014) menunjukkan bahwa akuisisi lintas batas menghasilkan keuntungan yang lebih tinggi dari akuisisi domestik. Hal ini dapat dilihat dari abnormal return yang signifikan pada saat sebelum dan sesudah akuisisi.…”

“…Adanya perbedaan abnormal return yang signifikan juga kemungkinan disebabkan oleh para spekulan yang mencari keuntungan jangka pendek, dimana para spekulan tersebut kemungkinan orang-orang internal perusahaan yang mempunyai informasi tentang motivasi perusahaan melakukan akuisisi. Hasil penelitian ini sesuai dengan apa yang diteliti oleh Aritonang et al (2009), Rani et al (2014), dan Sehgal et al (2012).…”

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

“…This might be due to the fact that this acquisition type may lead to higher return because synergy would materialise, as suggested by Song et al (2010a). In addition, as there is high information asymmetry and cultural barriers between target and bidder in CBMAs, full acquisition would ease the post-CBMA integration and improve firm's performance (Martynova & Renneboog, 2008;Rani et al, 2014). In the context of ASEAN firms, it is anticipated that full acquisition may explain the variation in firm's performance during CBMA as almost half of CBMA by ASEAN firms (46% of bidder and 41% of target) are full acquisition, as shown in Table 7.…”

“…Many studies found that announcement of CBMAs created wealth for bidders (Bhagat, Malhotra, & Zhu, 2011;Cakici, Hessel, & Tandon, 1996;Chari et al, 2010;Corhay & Rad, 2000;Goergen & Renneboog, 2004;Lowinski, Schiereck, & Thomas, 2004;Martynova & Renneboog, 2008;Masulis, Wang, & Xie, 2012;Mueller & Yurtoglu, 2007;Rani, Yadav, & Jain, 2014;Yang, 2015;Zhu & Jog, 2012). Though, there were a few studies claimed that bidding shareholder loss following CBMA announcement (Aybar & Ficici, 2009;Bris & Cabolis, 2008;Cakici et al, 1996;Corhay & Rad, 2000;Ferreira et al, 2010;Jory & Ngo, 2011;Mangold & Lippok, 2008).…”

“…For instance, Chari et al (2010) and Yang (2015) reported higher bidders' gain with higher ownership following acquisition. However, Martynova and Renneboog (2008) and Rani et al (2014) claimed that partial or majority post-acquisition ownership is not sufficient to create shareholders' wealth because in CBMAs, there was information asymmetry and cultural barriers between target and bidder. Therefore, a full control of target firm was a pre-requisite for the post-acquisition integration process.…”