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Does market misvaluation drive cross-border M&As?

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  • Huang, Wenxuan
  • Xu, Weidong
  • Li, Donghui
  • Zhao, Ling
  • Yang, Shijie

Abstract

Employing a panel sample of 61,532 cross-border mergers between 2000 and 2020, we investigate the impact of market misvaluation on corporate cross-border mergers and acquisitions (CBMAs). We find that firms with higher market misvaluation launch more CBMAs and tend to pay with their overvalued stock. However, the effect of market misvaluation on CBMAs will weaken over time. CBMAs driven by high market misvaluation result in lower short-term stock returns and better long-term profitability. Cross-sectional analyses show that the impact of market misvaluation on CBMAs can be mitigated by stronger country-level uncertainty avoidance and masculinism culture, while it is more pronounced in high individualism culture. At the firm level, the monitoring role of institutional investors and analysts can mitigate the impact of market misvaluation on CBMAs. Our results remain robust in various robustness tests and after addressing endogeneity concerns.

Suggested Citation

  • Huang, Wenxuan & Xu, Weidong & Li, Donghui & Zhao, Ling & Yang, Shijie, 2024. "Does market misvaluation drive cross-border M&As?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:intfin:v:92:y:2024:i:c:s104244312400026x
    DOI: 10.1016/j.intfin.2024.101960
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    More about this item

    Keywords

    Market misvaluation; CBMA; Market performance; CBMA payment; National culture;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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