Acquiring Control in Emerging Markets: Evidence from the Stock Market

54 Pages Posted: 21 Oct 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)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004

Abstract

When firms from developed markets acquire firms in emerging markets, market-capitalization-weighted monthly joint returns show a statistically significant increase of 1.8%. Panel data estimations suggest that the value gains from cross-border M&A transactions stem from the transfer of majority control from emerging-market targets to developed market acquirers - joint returns range from 5.8% to 7.8% when majority control is acquired. Announcement returns for acquirer and target firms estimate the distribution of gains and show a statistically significant increase of 2.4% and 6.9%, respectively. The evidence suggests that the stock market anticipates significant value creation from cross-border transactions that involve emerging-market targets leading to substantial gains for shareholders of both acquirer and target firms.

Keywords: FDI, cross-border mergers and acquisitions, emerging markets, surplus value, majority control

JEL Classification: D23, F21, F23, G34

Suggested Citation

Chari, Anusha and Ouimet, Paige and Tesar, Linda L., Acquiring Control in Emerging Markets: Evidence from the Stock Market (October 2004). Available at SSRN: https://ssrn.com/abstract=607202 or http://dx.doi.org/10.2139/ssrn.607202

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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