Cross-Border vs. Domestic Acquisitions: Evidence from India
55 Pages Posted: 26 Oct 2016 Last revised: 12 Jun 2017
Date Written: June 11, 2017
We examine the domestic and cross-border acquisition decision of Indian firms in the nine-year period from 2002 to 2010, a period following liberalization in the economy. Acquisition activity both domestic and cross-border has increased over the period. We find that larger, younger firms, firms with cash on hand and low leverage, and relatively overvalued firms are more likely to make an acquisition and prefer to make a cross-border acquisition to a domestic acquisition. Firms with lower levels of promoter (founding shareholder) holdings, larger boards, and belonging to a group are more likely to make an acquisition, but are indifferent between making a domestic or a cross-border acquisition. Industry competition is a significant determinant of acquisition activity with firms in more competitive industries are more likely to make an acquisition and more likely to make a cross-border acquisition. Our results hold controlling for acquisitions by manufacturing firms, prior M&A experience, and taking into account alternate growth strategies followed by firms.
Keywords: Mergers and Acquisitions, Product Market Competition, Emerging Markets, India
JEL Classification: G34
Suggested Citation: Suggested Citation