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Shareholder Benefits and Firm Performance: An Empirical Analysis of International Acquisitions by Firms from a Developing Economy

23 Pages Posted: 5 Oct 2006  

Shavin Malhotra

Carleton University - Eric Sprott School of Business

PengCheng Zhu

University of San Diego

Date Written: 2006

Abstract

Previous research on international mergers and acquisitions has not looked at the valuation consequences of international acquisitions by firms from a developing economy. This study examines the announcement effect and the post-acquisition long-term performance of 96 Indian international acquisitions of U.S. firms made in the period 1999-2005. The study also explores the impact of the Indian acquiring firms' U.S. acquisitions on their underlying operating variables, and risk diversification. We find that while the international acquisition announcements by Indian firms create significant short-term shareholders' wealth, in the long-run international acquisitions have a negative impact on the shareholders' wealth. We also find a significant decrease in the acquiring firms' financial profitability ratios, though there is an evidence of risk-reduction due to global diversification.

Keywords: International Mergers and Acquisitions, Event Study, Performance, Risk Diversification

JEL Classification: G15, G34, G41

Suggested Citation

Malhotra, Shavin and Zhu, PengCheng, Shareholder Benefits and Firm Performance: An Empirical Analysis of International Acquisitions by Firms from a Developing Economy (2006). Available at SSRN: https://ssrn.com/abstract=934968 or http://dx.doi.org/10.2139/ssrn.934968

Shavin Malhotra (Contact Author)

Carleton University - Eric Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada

Phil Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110
United States

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