When the Poor Buy the Rich: New Evidence on Wealth Effects of Cross-Border Acquisitions

Journal of Risk and Financial Management 2019, 12, 102; doi:10.3390/jrfm12020102

15 Pages Posted: 20 Sep 2019

See all articles by Hong-Hai Ho

Hong-Hai Ho

Foreign Trade University (FTU)

Thi Hanh Vu

Foreign Trade University (FTU) - School of Economics and International Business

Manh-Tung Ho

Phenikaa University - Center for Interdisciplinary Social Research

Dao Ngoc Tien

Independent

Quan Hoang Vuong

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management; Phenikaa University

Date Written: June 19, 2019

Abstract

The growing trend of merging and acquisition (M&A) investments from emerging to developed market economies over the last two decades motivates the question on the long-run effects of M&A on the wealth of emerging markets. This paper contributes to the current literature on cross-border M&A (CBMA) by focusing on the long-term effects of this event on the bidder’s stock return in emerging markets. To address the challenges of finding an accurate measure for the effects, this study applies the propensity score matching framework in tandem with difference-in-differences (DID) on a comprehensive dataset over the 1990-2010 period. The analyses show evidence of systematic detrimental impacts of cross-border M&A on shareholders’ welfare in the long run, to a certain extent, diverging from the existing literature, which mainly highlights the positive effects for certain types of M&A. The striking finding is that such strong negative effects remain persistent even when various factors previously known as capable of suppressing underperformance are considered. Our study is in line with the growing landscape of cross-border mergers and acquisitions from the “poor” to the “rich” countries.

Keywords: M&A; wealth effects; propensity score matching; emerging markets

Suggested Citation

Ho, Hong-Hai and Vu, Thi Hanh and Ho, Manh-Tung and Tien, Dao Ngoc and Vuong, Quan Hoang, When the Poor Buy the Rich: New Evidence on Wealth Effects of Cross-Border Acquisitions (June 19, 2019). Journal of Risk and Financial Management 2019, 12, 102; doi:10.3390/jrfm12020102 , Available at SSRN: https://ssrn.com/abstract=3452362

Hong-Hai Ho

Foreign Trade University (FTU)

91 Chua Lang St
Dong Da District
Hanoi, Hochiminh city 10000
Vietnam

Thi Hanh Vu (Contact Author)

Foreign Trade University (FTU) - School of Economics and International Business ( email )

Vietnam

Manh-Tung Ho

Phenikaa University - Center for Interdisciplinary Social Research ( email )

Vietnam

Dao Ngoc Tien

Independent ( email )

Quan Hoang Vuong

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management ( email )

ULB CP 145/01
21 Ave. F.D. Roosevelt
Brussels, Bruxelles 1050
Belgium
+32-2-6504864 (Phone)
+32-2-6504188 (Fax)

HOME PAGE: http://www.ceb-ulb.com/vuong-quan-hoang.html

Phenikaa University ( email )

To Huu road, Yen Nghia
Ha Dong district
Hanoi, Hanoi 100803
Vietnam

HOME PAGE: http://sites.google.com/site/vuongqh2019/

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