Partial Acquisitions in Emerging Markets: A Test of the Strategic Market Entry and Corporate Control Hypotheses
Peng Cheng Zhu
University of the Pacific - Eberhart School of Business
Isaac K. Otchere
Carleton University - Sprott School of Business; Carleton University - Sprott School of Business
September 26, 2010
Journal of Corporate Finance, Forthcoming
In this paper, we examine the motivations of acquirers undertaking partial acquisitions in emerging markets by testing two competing hypotheses: the market for corporate control hypothesis and the market entry hypothesis. We find that targets of cross-border acquisitions outperform targets of domestic acquisitions in the pre-acquisition period. While cross-border acquisitions have no significant impact on target firms’ operating performance, targets of domestic acquisitions experience significant improvements in operating performance and substantial changes in ownership structure after the acquisition. The evidence suggests that domestic partial acquisitions in emerging markets serve as a market for corporate control, while cross-border partial acquisitions are motivated by the strategic market entry rationale.
Number of Pages in PDF File: 46
Keywords: Emerging markets, corporate control, partial acquisitions, cross-border, information asymmetry, market entry
JEL Classification: G34
Date posted: September 29, 2010
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