IDEAS home Printed from https://ideas.repec.org/a/eee/ememar/v32y2017icp190-199.html
   My bibliography  Save this article

Domestic mergers and acquisitions in BRICS countries: Acquirers and targets

Author

Listed:
  • Kinateder, Harald
  • Fabich, Matthias
  • Wagner, Niklas

Abstract

We study the firm value determinants for domestic acquisitions within BRICS countries considering both acquirer and target shareholders. Targets earn significant positive announcement returns of 1.45% on average. Acquirers lose slightly. We employ a comprehensive set of explanatory variables and test for cross-sectional return drivers. Target returns are negatively related to pre-announcement returns and firm size, while they are positively related to GDP growth. Our results are consistent with insider trading capturing some of the target excess returns, which are highest for small targets based in countries with high recent GPD growth.

Suggested Citation

  • Kinateder, Harald & Fabich, Matthias & Wagner, Niklas, 2017. "Domestic mergers and acquisitions in BRICS countries: Acquirers and targets," Emerging Markets Review, Elsevier, vol. 32(C), pages 190-199.
    • Handle: RePEc:eee:ememar:v:32:y:2017:i:c:p:190-199
    DOI: 10.1016/j.ememar.2017.06.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1566014117300158
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ememar.2017.06.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    2. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    3. Jaffe, Jeffrey & Jindra, Jan & Pedersen, David & Voetmann, Torben, 2015. "Returns to acquirers of public and subsidiary targets," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 246-270.
    4. Jonathan A. Batten & Peter G. Szilagyi & Wagner, 2015. "Should emerging market investors buy commodities?," Applied Economics, Taylor & Francis Journals, vol. 47(39), pages 4228-4246, August.
    5. Nihat Aktas & Bodt Eric De & Jean-Gabriel Cousin, 2011. "Do financial markets care about SRI? Evidence from mergers and acquisitions," Post-Print hal-02312637, HAL.
    6. Anusha Chari & Wenjie Chen & Kathryn M E Dominguez, 2012. "Foreign Ownership and Firm Performance: Emerging Market Acquisitions in the United States," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(1), pages 1-42, April.
    7. Zhu, PengCheng & Jog, Vijay & Otchere, Isaac, 2011. "Partial acquisitions in emerging markets: A test of the strategic market entry and corporate control hypotheses," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 288-305, April.
    8. Dean Xu & Changhui Zhou & Phillip H Phan, 2010. "A real options perspective on sequential acquisitions in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(1), pages 166-174, January.
    9. Danbolt, Jo & Siganos, Antonios & Vagenas-Nanos, Evangelos, 2015. "Investor sentiment and bidder announcement abnormal returns," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 164-179.
    10. Aybar, Bülent & Thanakijsombat, Thanarerk, 2015. "Financing decisions and gains from cross-border acquisitions by emerging-market acquirers," Emerging Markets Review, Elsevier, vol. 24(C), pages 69-80.
    11. Bertrand, Olivier & Betschinger, Marie-Ann, 2012. "Performance of domestic and cross-border acquisitions: Empirical evidence from Russian acquirers," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 413-437.
    12. Rugman,Alan M., 2005. "The Regional Multinationals," Cambridge Books, Cambridge University Press, number 9780521842655, September.
    13. Bülent Aybar & Aysun Ficici, 2009. "Cross-border acquisitions and firm value: An analysis of emerging-market multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(8), pages 1317-1338, October.
    14. Reza Yaghoubi & Mona Yaghoubi & Stuart Locke & Jenny Gibb, 2016. "Mergers and acquisitions: a review. Part 1," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 33(1), pages 147-188, March.
    15. Deng, Ping & Yang, Monica, 2015. "Cross-border mergers and acquisitions by emerging market firms: A comparative investigation," International Business Review, Elsevier, vol. 24(1), pages 157-172.
    16. Sara B. Moeller & Frederik P. Schlingemann & René M. Stulz, 2005. "Wealth Destruction on a Massive Scale? A Study of Acquiring‐Firm Returns in the Recent Merger Wave," Journal of Finance, American Finance Association, vol. 60(2), pages 757-782, April.
    17. De Beule, Filip & Duanmu, Jing-Lin, 2012. "Locational determinants of internationalization: A firm-level analysis of Chinese and Indian acquisitions," European Management Journal, Elsevier, vol. 30(3), pages 264-277.
    18. Reza Yaghoubi & Mona Yaghoubi & Stuart Locke & Jenny Gibb, 2016. "Mergers and acquisitions: a review (part 2)," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 33(3), pages 437-464, August.
    19. Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
    20. Jonathan Williams & Angel Liao, 2008. "The Search for Value: Cross-border Bank M&A in Emerging Markets," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 50(2), pages 274-296, June.
    21. Gul, Ferdinand A. & Kim, Jeong-Bon & Qiu, Annie A., 2010. "Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: Evidence from China," Journal of Financial Economics, Elsevier, vol. 95(3), pages 425-442, March.
    22. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    23. Jo Danbolt, 2004. "Target Company Cross‐border Effects in Acquisitions into the UK," European Financial Management, European Financial Management Association, vol. 10(1), pages 83-108, March.
    24. Deng, Xin & Kang, Jun-koo & Low, Buen Sin, 2013. "Corporate social responsibility and stakeholder value maximization: Evidence from mergers," Journal of Financial Economics, Elsevier, vol. 110(1), pages 87-109.
    25. Eun, Cheol S. & Kolodny, Richard & Scheraga, Carl, 1996. "Cross-border acquisitions and shareholder wealth: Tests of the synergy and internalization hypotheses," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1559-1582, November.
    26. Feito-Ruiz, Isabel & Menéndez-Requejo, Susana, 2011. "Cross-border Mergers and Acquisitions in different legal environments," International Review of Law and Economics, Elsevier, vol. 31(3), pages 169-187, September.
    27. Kohli, Reena & Mann, Bikram Jit Singh, 2012. "Analyzing determinants of value creation in domestic and cross border acquisitions in India," International Business Review, Elsevier, vol. 21(6), pages 998-1016.
    28. Jeffrey J. Reuer & Mitchell P. Koza, 2000. "Asymmetric information and joint venture performance: theory and evidence for domestic and international joint ventures," Strategic Management Journal, Wiley Blackwell, vol. 21(1), pages 81-88, January.
    29. Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
    30. Bhagat, Sanjai & Malhotra, Shavin & Zhu, PengCheng, 2011. "Emerging country cross-border acquisitions: Characteristics, acquirer returns and cross-sectional determinants," Emerging Markets Review, Elsevier, vol. 12(3), pages 250-271, September.
    31. Chen, Wenjie, 2011. "The effect of investor origin on firm performance: Domestic and foreign direct investment in the United States," Journal of International Economics, Elsevier, vol. 83(2), pages 219-228, March.
    32. Sathyajit R Gubbi & Preet S Aulakh & Sougata Ray & M B Sarkar & Raveendra Chittoor, 2010. "Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(3), pages 397-418, April.
    33. Ronald W. Masulis & Cong Wang & Fei Xie, 2007. "Corporate Governance and Acquirer Returns," Journal of Finance, American Finance Association, vol. 62(4), pages 1851-1889, August.
    34. John Goddard & Philip Molyneux & Tim Zhou, 2012. "Bank mergers and acquisitions in emerging markets: evidence from Asia and Latin America," The European Journal of Finance, Taylor & Francis Journals, vol. 18(5), pages 419-438, May.
    35. Wagner, Niklas, 2004. "Time-varying moments, idiosyncratic risk, and an application to hot-issue IPO aftermarket returns," Research in International Business and Finance, Elsevier, vol. 18(1), pages 59-72, April.
    36. Tao, Fang & Liu, Xiaohui & Gao, Lan & Xia, Enjun, 2017. "Do cross-border mergers and acquisitions increase short-term market performance? The case of Chinese firms," International Business Review, Elsevier, vol. 26(1), pages 189-202.
    37. Yılmaz, Işıl Sevilay & Tanyeri, Başak, 2016. "Global Merger and Acquisition (M&A) activity: 1992–2011," Finance Research Letters, Elsevier, vol. 17(C), pages 110-117.
    38. Asquith, Paul & Bruner, Robert F. & Mullins, David Jr., 1983. "The gains to bidding firms from merger," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 121-139, April.
    39. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, vol. 17(4), pages 316-332.
    40. Aktas, Nihat & de Bodt, Eric & Cousin, Jean-Gabriel, 2011. "Do financial markets care about SRI? Evidence from mergers and acquisitions," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1753-1761, July.
    41. Lebedev, Sergey & Peng, Mike W. & Xie, En & Stevens, Charles E., 2015. "Mergers and acquisitions in and out of emerging economies," Journal of World Business, Elsevier, vol. 50(4), pages 651-662.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yusnidah Ibrahim & Jimoh Olajide Raji, 2018. "Cross-border merger and acquisition activities in Asia: the role of macroeconomic factors," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 35(2), pages 307-329, May.
    2. Evans Opoku‐Mensah & Yuming Yin, 2023. "Controlling shareholders' influence on acquisition decisions and value creation: An empirical study from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1965-1980, April.
    3. Gabriel J. Power & Neelam Rani & Anandadeep Mandal, 2022. "Corporate control and the choice of investment financing: the case of corporate acquisitions in India," Review of Quantitative Finance and Accounting, Springer, vol. 58(1), pages 41-68, January.
    4. Evans Opoku-Mensah & Yuming Yin & Asantewaa Ampofo Sandra & Priscilla Tuffour, 2019. "Mergers and Acquisitions Antecedents in BRICS," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 11(3), pages 202-214, September.
    5. Abdul Wajid & Anjim Sabiha & Shakeb Akhtar & Mosab I. Tabash & Linda Nalini Daniel, 2022. "Cross-Border Acquisitions and Shareholders’ Wealth: The Case of the Indian Pharmaceutical Sector," JRFM, MDPI, vol. 15(10), pages 1-17, September.
    6. Cappa, Francesco & Collevecchio, Francesca & Oriani, Raffaele & Peruffo, Enzo, 2022. "Banks responding to the digital surge through Open Innovation: Stock market performance effects of M&As with fintech firms," Journal of Economics and Business, Elsevier, vol. 121(C).
    7. Hossain, Mohammed Sawkat, 2021. "Merger & Acquisitions (M&As) as an important strategic vehicle in business: Thematic areas, research avenues & possible suggestions," Journal of Economics and Business, Elsevier, vol. 116(C).
    8. Marcato, Gianluca & Sebehela, Tumellano & Campani, Carlos Heitor, 2018. "Volatility smiles when information is lagged in prices," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 151-165.
    9. Kumar, Deepak & Sengupta, Keya & Bhattacharya, Mousumi, 2023. "Macroeconomic influences on M&A deal outcomes: An analysis of domestic and cross-border M&As in developed and emerging economies," Journal of Business Research, Elsevier, vol. 161(C).
    10. Harald Kinateder & Kimberly Weber & Niklas F. Wagner, 2019. "Revisiting Calendar Anomalies In Brics Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(2), pages 213-236, July.
    11. Baghestani, Hamid & Chazi, Abdelaziz & Khallaf, Ashraf, 2019. "A directional analysis of oil prices and real exchange rates in BRIC countries," Research in International Business and Finance, Elsevier, vol. 50(C), pages 450-456.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lebedev, Sergey & Peng, Mike W. & Xie, En & Stevens, Charles E., 2015. "Mergers and acquisitions in and out of emerging economies," Journal of World Business, Elsevier, vol. 50(4), pages 651-662.
    2. Li, Xue & Anwar, Sajid & Peng, Fei, 2022. "Cross-border acquisitions and the performance of Chinese publicly listed companies," Journal of Business Research, Elsevier, vol. 141(C), pages 575-588.
    3. Monastyrenko, Evgenii, 2017. "Eco-efficiency outcomes of mergers and acquisitions in the European electricity industry," Energy Policy, Elsevier, vol. 107(C), pages 258-277.
    4. Yang Zhang, 2018. "Corporate Governance Effects on Risk Management and Shareholder Wealth: The Case of Mergers and Acquisitions," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4-2018, January-A.
    5. Ning, Lutao & Kuo, Jing-Ming & Strange, Roger & Wang, Boya, 2014. "International investors’ reactions to cross-border acquisitions by emerging market multinationals," International Business Review, Elsevier, vol. 23(4), pages 811-823.
    6. Sharma, Abhijit & Raat, Erwin, 2016. "Acquiring control in emerging markets: Foreign acquisitions in Eastern Europe and the effect on shareholder wealth," Research in International Business and Finance, Elsevier, vol. 37(C), pages 153-169.
    7. Zhang, Weihong & Wang, Kecheng & Li, Ling & Chen, Yong & Wang, Xinmeng, 2018. "The impact of firms' mergers and acquisitions on their performance in emerging economies," Technological Forecasting and Social Change, Elsevier, vol. 135(C), pages 208-216.
    8. Tao, Fang & Liu, Xiaohui & Gao, Lan & Xia, Enjun, 2017. "Do cross-border mergers and acquisitions increase short-term market performance? The case of Chinese firms," International Business Review, Elsevier, vol. 26(1), pages 189-202.
    9. Neelam Rani & Aman Asija, 2017. "Has Financial Crisis Affected the Announcement Gains of Indian Cross-border Acquisitions?," IIM Kozhikode Society & Management Review, , vol. 6(1), pages 55-66, January.
    10. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    11. repec:wsr:wpaper:y:2016:i:169 is not listed on IDEAS
    12. Chowdhury, Reza H. & Maung, Min, 2018. "Historical ties between nations: How do they matter in cross-border mergers and acquisitions?," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 30-48.
    13. Li, Jiatao & Li, Peixin & Wang, Baolian, 2016. "Do cross-border acquisitions create value? Evidence from overseas acquisitions by Chinese firms," International Business Review, Elsevier, vol. 25(2), pages 471-483.
    14. Jain, Samta & Kashiramka, Smita & Jain, P.K., 2019. "Wealth effects on cross-border acquisition firms from emerging economies," Emerging Markets Review, Elsevier, vol. 40(C), pages 1-1.
    15. Evans Opoku-Mensah & Yuming Yin & Asantewaa Ampofo Sandra & Priscilla Tuffour, 2019. "Mergers and Acquisitions Antecedents in BRICS," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 11(3), pages 202-214, September.
    16. Samta Jain & Smita Kashiramka & P. K. Jain, 2018. "Impact of Organizational Learning and Absorptive Capacity on the Abnormal Returns of Acquirers: Evidence from Cross-Border Acquisitions by Indian Companies," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 19(4), pages 289-303, December.
    17. Hoa Luong & Abeyratna Gunasekarage & Syed Shams, 2021. "CEO pay slice and acquisitions in Australia: the role of tournament incentives," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 18(5), pages 833-868, September.
    18. Yen, Tze-Yu & André, Paul, 2019. "Market reaction to the effect of corporate social responsibility on mergers and acquisitions: Evidence on emerging markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 114-131.
    19. Guidi, Marco & Sogiakas, Vasilios & Vagenas-Nanos, Evangelos & Verwijmeren, Patrick, 2020. "Spreading the sin: An empirical assessment from corporate takeovers," International Review of Financial Analysis, Elsevier, vol. 71(C).
    20. Martynova, M. & Renneboog, L.D.R., 2006. "Mergers and Acquisitions in Europe," Discussion Paper 2006-6, Tilburg University, Center for Economic Research.
    21. Neelam Rani & Surendra S Yadav & P.K. Jain, 2015. "Impact of Mergers and Acquisitions on Shareholders’ Wealth in the Short Run: An Event Study Approach," Vikalpa: The Journal for Decision Makers, , vol. 40(3), pages 293-312, September.

    More about this item

    Keywords

    Announcement returns; BRICS countries; Emerging markets; Event study; Mergers and acquisitions;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:32:y:2017:i:c:p:190-199. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620356 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.