What Determines the Acquirers’ Location Preferences and Ownership Outcomes? An Empirical Study of East and Southeast Asian Markets
55 Pages Posted: 23 Jan 2016 Last revised: 22 Jul 2016
Date Written: January 22, 2016
This paper addresses two of the most important questions in the bidder’s acquisition planning: Should they acquire a domestic or cross-border target? Acquire partial- or full-control? In the context of eight East and Southeast Asian countries with a takeover wave following the 1997-1998 Asian financial crisis, it is found that good corporate governance of a target is a significant feature attracting both domestic and cross-border acquirers. However, target firms with poor financial performance are more likely to be acquired by domestic bidders while good-performing firms are more attractive to cross-border bidders. The findings also support the idea that the post-takeover integration process in cross-border takeovers is likely to be more problematic relative to domestic acquisitions and, therefore, the post-acquisition incremental performance improvement is greater for domestic targets compared to cross-border targets. Further, this paper indicates that targets with more independent directors, more powerful CEOs, and greater blockholdings are more likely to be taken over through partial-control rather than full-control acquisitions.
Keywords: Target firms; Acquisition location; Equity ownership outcomes; Corporate governance; Propensity score matching; Difference-In-Differences approach
JEL Classification: G32; G34
Suggested Citation: Suggested Citation