Foreign Direct Investment in Emerging Markets and Acquirers’ Value Gains

Leonidas Barbopoulos, Andrew Marshall, Cameron MacInnes, Patrick McColgan, Foreign Direct Investment in Emerging Markets and Acquirers’ Value Gains, International Business Review, Volume 23, Issue 3, 2014, Pages 604-619, ISSN 0969-5931, https://doi.org/10.1016/j.ibusrev.2013.10.003. (https:/

Posted: 16 Mar 2021

See all articles by Leonidas G. Barbopoulos

Leonidas G. Barbopoulos

University of Edinburgh

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Cameron MacInnes

University of Strathclyde

Patrick McColgan

University of Strathclyde

Date Written: 2014

Abstract

[enter Abstract Body]We investigate the shareholder wealth effects of 306 foreign direct investment (FDI) announcements by UK firms in seventy-five emerging markets (EM). Our results show that acquirers enjoy highly significant gains during the announcement period of FDI. Perhaps surprisingly, the highest gains are accrued to acquirers investing in countries with high political risk and high corruption ratings. The type of asset acquired has also a significant effect on the gains of acquirers’ shareholders, with the highest gains accrued to acquirers of physical assets. Also, investments in physical assets in EM with a high corruption rating elicit the highest gains. We contend that UK firms following resource-seeking strategies in EM with a high corruption rating are facilitated access to resources on favorable terms and this is viewed positively by the market participants. Our results are robust to alternative model specifications and the endogenous choice to expand internationally.

Keywords: Announcement period returns, Corruption, Emerging markets, Foreign direct investment, Physical assets, Political risk

JEL Classification: G34

Suggested Citation

Barbopoulos, Leonidas G. and Marshall, Andrew P. and MacInnes, Cameron and McColgan, Patrick, Foreign Direct Investment in Emerging Markets and Acquirers’ Value Gains (2014). Leonidas Barbopoulos, Andrew Marshall, Cameron MacInnes, Patrick McColgan, Foreign Direct Investment in Emerging Markets and Acquirers’ Value Gains, International Business Review, Volume 23, Issue 3, 2014, Pages 604-619, ISSN 0969-5931, https://doi.org/10.1016/j.ibusrev.2013.10.003. (https:/, Available at SSRN: https://ssrn.com/abstract=3796921

Leonidas G. Barbopoulos (Contact Author)

University of Edinburgh ( email )

University of Edinburgh Business School
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

Cameron MacInnes

University of Strathclyde ( email )

Patrick McColgan

University of Strathclyde ( email )

Curran Building
100 Cathedral Street
Glasgow, G4 0LN
United Kingdom
+44 1415483690 (Phone)

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