U.S. Takeovers in Foreign Markets: Do They Impact Emerging and Developed Markets Differently?
45 Pages Posted: 26 Apr 2011
Date Written: April 25, 2011
We investigate the effect that U.S. acquisitions of targets in emerging and developed countries have on the targets’ rivals by measuring their stock price reaction to the acquisition announcement. On average, emerging market rivals react positively to these acquisitions while the reaction in developed markets is insignificant. In developed markets, the main factors explaining the reaction of rival firms are individual rival characteristics such as rival size, efficiency, growth opportunities, and leverage. In contrast, in emerging markets, country, industry, and acquisition characteristics such as economic development, shareholder protection, and the target’s public status, industry, and percent acquired, play a more important role.
Keywords: Cross-border merger and acquisitions, rivals, emerging markets
JEL Classification: G14, G34
Suggested Citation: Suggested Citation