Three essays on cross-border Mergers and Acquisitions in emerging markets

Although cross-border Mergers and Acquisitions (M&As) in emerging markets has reached record levels in recent years, systematic knowledge about these M&As is almost non-existent in the existing literature. In this thesis, we fill this gap by examining the cross-border partial acquisitions in 22 emerging countries between 1990 and 2007. The thesis contains three essays. The first essay examines how information asymmetry has impacted acquisition deals, such as acquisition premium, payment method, and majority control. We find that a high level of information asymmetry results in the acquiring firms paying a higher premium in order to gain majority control and private information resources in the target firms. We construct a three-stage simultaneous equation model to control for endogeneity among acquisition premium, payment method, and the degree of control and show that our results remain robust.;The next two essays focus on the target firm's long-term performance and risk in the post-acquisition period, respectively. We find that, in contrast to the comparable domestic acquisitions, target firms in cross-border acquisitions demonstrate better operating performance than their rival firms before the acquisitions, but there is no significant improvement in their post-acquisition performance. Thus, we conclude that domestic acquisitions are conducted for corporate control while cross-border acquisitions are undertaken to gain market entry. We then show that cross-border acquisitions significantly reduce the target firm risk, while domestic acquisitions increase the target firm risk. This result can impact the risk-return trade-off of these partially acquired target firms. Our main conclusions are robust across time periods, acquirers in developed and emerging markets, endogeneity and sample selection problems, and methodological choices, including bootstrap. The thesis results have major implications for potential target and acquiring firms, domestic and foreign investors, and policy makers in emerging countries.