Dubious Value of International Acquisitions by Emerging Economy Firms: The Case of Indian Firms

43 Pages Posted: 11 Apr 2010

See all articles by Aneel G. Karnani

Aneel G. Karnani

University of Michigan, Stephen M. Ross School of Business

Date Written: April 1, 2010

Abstract

This article addresses the question whether companies from emerging economies create shareholder value through foreign acquisitions. The popular business press usually views these foreign acquisitions very positively. The stock markets have often reacted negatively to the acquisitions. The management always claims that the acquisition is in the long term strategic interests of the firm. This article attempts to shed light on these conflicting positions: short term versus long term, and financial versus strategic logic. Using a mix of stock market reaction for a small sample and three in-depth case studies, I conclude that large foreign acquisitions from India have not created shareholder value. The causes of this under-performance are: too little integration, agency problems, and easy capital. Finally, I use a case study to illustrate a successful approach to foreign acquisitions: significant synergies, reasonable price, and deep integration.

Keywords: International acquisitions, emerging economy, shareholder value

JEL Classification: F23, G34, M10

Suggested Citation

Karnani, Aneel G., Dubious Value of International Acquisitions by Emerging Economy Firms: The Case of Indian Firms (April 1, 2010). Ross School of Business Paper No. 1140, Available at SSRN: https://ssrn.com/abstract=1586852 or http://dx.doi.org/10.2139/ssrn.1586852

Aneel G. Karnani (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
437
Abstract Views
1,933
rank
83,211
PlumX Metrics