Cross-country determinants of ownership choices in cross-border acquisitions: Evidence from emerging markets

• Published in: Journal of multinational financial management Vol. 44; pp. 14 - 35
• Main Authors: Dang, Man, Henry, Darren, Nguyen, Manh Toan, Hoang, Viet Anh
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.03.2018
• Subjects: Cross-country determinants; Emerging markets; Imperfect market conditions; Ownership choices; Target firms; F21; Target firms; O16; Ownership choices; F23; G32; Emerging markets; G34; Cross-country determinants; Imperfect market conditions
• ISSN: 1042-444X; 1873-1309
• DOI: 10.1016/j.mulfin.2018.01.001

•We examine the cross-country determinants of bidding firm ownership choices.•Broad sample comprises 16,806 acquisitions in 41 emerging markets covering the 2000–2015 period.•Institutional, economic, and cultural attributes and differences affect bidders’ equity choices.•Bidders assess such attributes as part of acquisition risk, benefits and likelihood.•The study expands the understanding of imperfect conditions in emerging markets. We examine the cross-country determinants of bidder ownership choices regarding (i) government quality, (ii) economic freedom, (iii) international trade, (iv) financial development, and (v) cultural distance, in cross-border acquisitions of emerging markets-located targets. The sample comprises 16,806 acquisitions across 41 emerging markets in the 2000–2015 period. We find that the likelihood of a planned (and completed) minority acquisition relative to a majority or full acquisition is higher if the target operates in a country with poorer government quality, inferior economic freedom, stronger restrictions on international trade, lower financial development, and greater cultural distance with the bidder country. Differences in these institutional attributes between bidder and target countries similarly are informative of bidder acquisition decisions. The results suggest that bidders actively assess cross-country characteristics as part of their acquisition planning, including risk, benefits and acquisition likelihood. The findings provide potential mechanisms for countries to further increase foreign investment through cross-border acquisitions.