Market reactions when firms from less developed countries take over firms in more developed countries : analysis of countries by four levels of income

• Autor(a) principal: Pires, Rita Maria Rodrigues Mateus
• Data de Publicação: 2023
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/42596
• topic: Cross-border mergers and acquisitions; Short-term market reactions; Lower-middle income level countries; Upper-middle income level countries; High income level countries; Event study; Value creation; Fusões e aquisições transfronteiriças; Reações do mercado a curto prazo; Países de rendimento médio-baixo; Países de rendimento médio-alto; Países de rendimento alto; Estudo de eventos; Criação de valor; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

Cross-border mergers and acquisitions (M&As) are becoming increasingly prevalent in the worldwide M&A activity, as companies seek to expand their operations, access new markets, and achieve competitive advantage. However, the existing research on M&As has primarily focused on domestic deals or is limited to public or US-based companies. This paper aims to address this gap by examining the short-term market reactions when firms from less developed countries acquire firms in more developed countries. The study sample categorizes bidders and targets based on their country’s income level, comprising 1,216 deals announced between 1987 and 2022. Empirical evidence strongly suggests that these transactions have a positive impact on cumulative abnormal returns (CARs) of acquirers. This dissertation also investigates whether various factors such as cultural distance, geographical distance, the use of financial advisors, the institutional conditions of the home country, and the degree of innovation of the host country explain bidders’ returns. The results show that cultural distance, as measured by the composite cultural index (CDI), is negatively associated with CARs. The degree of government effectiveness of the home country and the R&D spending relative to the GDP of the host country also have a negative impact on CARs, which contradicts prior literature. Nevertheless, as most results are mixed, the research cannot identify with certainty the factors that drive the positive CARs observed, highlighting their complexity.