Partial Acquisitions in Emerging Markets: A Test of the Strategic Market Entry and Corporate Control Hypotheses

46 Pages Posted: 29 Sep 2010  

Peng Cheng Zhu

University of the Pacific - Eberhart School of Business

Vijay Jog

Carleton University

Isaac K. Otchere

Carleton University - Sprott School of Business

Date Written: September 26, 2010

Abstract

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.

Keywords: Emerging markets, corporate control, partial acquisitions, cross-border, information asymmetry, market entry

JEL Classification: G34

Suggested Citation

Zhu, Peng Cheng and Jog, Vijay and Otchere, Isaac K., Partial Acquisitions in Emerging Markets: A Test of the Strategic Market Entry and Corporate Control Hypotheses (September 26, 2010). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1682959

Peng Cheng Zhu

University of the Pacific - Eberhart School of Business ( email )

3601 Pacific Ave.
Stockton, CA 95211
United States
209-946-3904 (Phone)
209-946-2586 (Fax)

HOME PAGE: http://138.9.110.12/x31140.xml

Vijay Jog

Carleton University ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada
(613) 520-2600 Ext. 2377 (Phone)

Isaac K. Otchere (Contact Author)

Carleton University - Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada
(613) 520-2600 ext 2731 (Phone)
(613) 520-4427 (Fax)

Paper statistics

Downloads
138
Rank
172,832
Abstract Views
710