Abstract
In this paper we study the cross border mergers and acquisition between the US and Indian firms. Our empirical work suggests that US firms realize significant losses on the announcement of acquisitions of Indian targets while Indian targets realize significant gains on the announcement mergers with US acquirers. Publicly-traded Indian firms realize significant returns on their announcement of acquisitions of publicly-traded US firms but realize significant positive returns on announcement of acquisitions of privately-held US firms and subsidiary firm targets. Publicly-traded US targets realize insignificant gains when US acquired by Indian firms.
Highlights
Much of the current research on cross-border mergers focuses on analyzing the returns of industrialized firm’s acquisitions of emerging world targets.1 Little attention has been given to acquisitions of developed country targets by emerging world country firms
We find that Indian target firms when acquired by a publicly-traded US firm, realize positive abnormal returns around the announcement date whereas acquiring firms suffer a loss of market value around the announcement date
When we split the sample9 into the US acquirers of publicly-traded, privately-held and subsidiary firm Indian target companies, we find the abnormal returns on the announcements of US acquisitions of publicly-traded and subsidiary firm targets are statistically insignificant
Summary
Much of the current research on cross-border mergers focuses on analyzing the returns of industrialized firm’s acquisitions of emerging world targets. Little attention has been given to acquisitions of developed country targets by emerging world country firms. Much of the current research on cross-border mergers focuses on analyzing the returns of industrialized firm’s acquisitions of emerging world targets.. Researchers have focused primarily on the returns to the acquirers and none of the studies to date have investigated the effect of announcement of mergers and acquisitions on the target firms in the cross border. International Journal of Banking and Finance, Vol 8, Iss. 1 [2011], Art. 3. Number 1, March 2011: 35-58 mergers and acquisitions involving developed and developing world firms. We study both types of cross-border merger activities by examining the Indian and US company returns when US firms are acquirers of Indian firms and when Indian firms are acquirers of US firms.. We find that the abnormal returns for the targets of publicly-traded acquirers are consistently higher than the abnormal returns of targets of privately-held acquirers
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