Performance of cross-border acquirers from India and China: its sustainability in the long-run?

Abstract

Purpose Emerging market multinational companies have been vigorous in pursuing inorganic growth through cross-border acquisitions (CBAs). The fundamental studies till now have portrayed that rapid internationalization through CBAs tends to create value for these emerging market firms (EMFs) in the short term. However, there is an ambiguity about whether these firms endure better performance in the long term. The purpose of this study is to assess the long-term (ex-post) financial and operating performance of EMFs involved in overseas acquisitions before the COVID-19 pandemic hit the world economy. Design/methodology/approach CBAs completed by Indian and Chinese companies constitute the sample of the study. The performance has been analysed during the pre-COVID period spanning 17 years from 2001 to 2017. A comprehensive set of 14 financial ratios has been used to represent change (improvement/decline) in enterprises’ post-acquisition operating performance; these ratios have been divided into four broad groups: profitability, efficiency, solvency and liquidity ratios. Findings The performance of Indian companies has deteriorated significantly after the acquisition. However, there has been no change (deterioration/improvement), subsequent to CBAs, in the profitability of Chinese firms. Practical implications The findings of the study support that firms from emerging economies exploit CBAs as a “springboard” to obtain strategic assets including intangible resources and brands rather than to achieve synergies through economies of scale and scope. Apparently, outbound acquisitions by emerging economy firms are not driven by cost-reduction or revenue-generation activities. Originality/value None of the studies, to the best knowledge of the authors, has carried out performance analysis using a comprehensive set of financial ratios. The comparative study of two emerging economies is another valuable addition to the existing literature. The study holds the potential to serve as the benchmark to assess the performance of CBAs executed after COVID-19.

Do Cross-Border Mergers and Acquisitions by Emerging Market Enterprises Enhance Long-Term Productivity? The Host Country Market Size Effect Moderated by Technological Absorption Efforts

“…Technological spillovers are influenced by various factors, including host countries' intellectual property regimes and cultural differences, impacting firm integration and efficiency [12][13][14]. Acquisition motives often include gaining strategic resources, brands, market expansion, and technological knowledge [15,16]. Despite attention towards technological spillovers and market size effects, the interaction between these multi-dimensional motives and their impact on productivity lacks thorough discussion.…”