Cross Border Mergers and Acquisitions in Emerging Markets: The Stock Market Valuation of Corporate Control

51 Pages Posted: 1 Jul 2004

See all articles by Anusha Chari

Anusha Chari

University of North Carolina (UNC) at Chapel Hill - Department of Economics; National Bureau of Economic Research (NBER); University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Paige Ouimet

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 15, 2004

Abstract

Using a database that covers all transactions that involve a developed-market acquirer and an emerging-market target from 1988-2002, this paper studies the stock market's reaction to acquisition announcements in emerging markets. The evidence suggests that the stock market anticipates significant value creation from cross border acquisitions of emerging market targets. Panel data estimations show that, on average, monthly returns for target firms increase by 5.05 to 6.68 percent in alternative specifications when a cross border acquisition is announced, while acquirer returns increase, on average, by 1.65 to 3.05 percent. The benefits of the acquisitions stem from the transfer of majority control from emerging market targets to developed market acquirers. Overall, the results suggest that the boom in cross border mergers and acquisitions in emerging markets in the late 1990s led to substantial gains for shareholders of both acquiring and target firms.

Suggested Citation

Chari, Anusha and Ouimet, Paige and Tesar, Linda L., Cross Border Mergers and Acquisitions in Emerging Markets: The Stock Market Valuation of Corporate Control (March 15, 2004). EFA 2004 Maastricht Meetings Paper No. 3479. Available at SSRN: https://ssrn.com/abstract=559923 or http://dx.doi.org/10.2139/ssrn.559923

Anusha Chari (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

McColl Building
Chapel Hill, NC 27599-3490
United States

Paige Ouimet

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-763-2254 (Phone)
734-764-2769 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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