Cross-border acquisitions and firm value: An analysis of emerging-market multinationals

The primary objective of this study is to examine the value implications of cross-border acquisitions of emerging-market multinationals (EMMs). We examine 433 mergers and acquisitions announcements associated with 58 EMMs during the sample period 1991–2004. The mergers and acquisitions announcements data come from the Thomson SDC Platinum database. We employ event study methodology to explore the impact of the announcements on the value of acquiring firms. The results show that, on average, cross-border expansions of EMMs through acquisitions do not create value, but point to value destruction for more than half of the transactions analyzed. To explore the factors influencing the direction and magnitude of market reaction, we analyze a cross-sectional sample of firms. While we find that target size, ownership structure of the target (private vs public), and structure of the bidder (diversified vs non-diversified) positively affect the bidder value, high-tech nature of the bidder and pursuit of targets in related industries negatively affect the bidder value. Our empirical findings provide some support for the positive impact of the stake pursued in the target firm and cultural distance, but not for the international experience and enhanced corporate governance.