Cross-border acquisitions by emerging countries multinationals : short-term abnormal returns

Abstract

<p>The current study investigates short-term abnormal returns of emerging countries multinationals acquirers on cross-border acquisitions in other emerging and developed countries. For this objective, the current study employs market return model approach and then uses the event study to estimate short-term abnormal returns of the emerging countries acquirers and used daily data for the period of January 01, 2010 to March 31, 2018. Statistical results lead to conclude that shareholders of the emerging countries acquirers earn short-term positive and statistically significant abnormal returns on cross-border acquisitions in other emerging countries. Similarly, results conclude that shareholders of the acquiring firms of the emerging countries earn short-term positive and statistically significant returns on cross-border acquisitions in developed countries. These return patterns of the emerging countries multinational companies (EMNCs) on cross-border acquisitions in developing and developed countries are not like abnormal short-term abnormal return patterns of the developed countries multinational companies (MNCs) on cross-border acquisitions. The current study also concludes that factors such as political stability has inverse, legal framework inverse though insignificant, size of emerging countries acquirers direct, leverage negative, and ownership no impact on short-term abnormal returns of EMNCs proxied by CAR (-1, 1) on cross-border acquisitions in other emerging countries. Moreover, concludes that factors such as political stability, legal framework, and size of emerging countries acquirers have inverse, leverage direct, ownership has no effect on short-term abnormal returns of EMNCs proxied by CAR (-1, 1) on cross-border acquisitions in developed countries. The implications of the current study are of great importance both for the acquirers and investors of the emerging countries. Therefore, investors can insight short-term abnormal return patterns on the announcement of cross-border acquisitions by the EMNCs in other emerging and developed countries. Further, implications of the current study can help to anticipate response of the market participants on the news of cross-border acquisitions by the EMNCs in developing and developed countries. Henceforth, keeping in view the short- term positive abnormal pattern of the acquirers of the emerging countries multinationals on cross-border acquisitions, smart investment decisions can be made to achieve synergies, efficiencies, access on skilled labor, access on low cost capital, higher sales, and access on technology that will ultimately increase the wealth of the shareholders. Limitations of the current study are to cross-border acquisitions of the emerging countries multinationals in developing and developed countries, but more research work can be undertaken to investigate the impact of industry-wise cross-border acquisitions. Also, current study is limited to examine the cross-border acquisitions of the emerging countries multinationals of the public companies in other developing and developed countries, however more empirical research can be undertaken to examine the effects of cross-border acquisitions in private sectors. More empirical research can be undertaken by adding the impact of cross-border mergers by the emerging countries multinationals on short-term abnormal returns in developing and developed countries. Similarly, research work can be undertaken to examine the long run impact of the cross-border mergers and acquisitions by the emerging countries multinationals on the efficiencies and profitability.</p>