Determinants-Of-Cross-Border-Merger-and-Acquisitio

ProcediaEconomicsandFinance7(2013)96–1022212-5671©2013TheAuthors.PublishedbyElsevierB.V.Selectionandpeer-reviewunderresponsibilityofICEBR2013doi:10.1016/S2212-5671(13)00223-2ScienceDirectInternationalConferenceonEconomicsandBusinessResearch2013(ICEBR2013)DeterminantsOfCrossBorderMergerandAcquisitioninAdvancedEmergingMarketAcquiringFirmsKamalFahrulrazyRahima*,NoryatiAhmadb,IsmailAhmadc,FahmiAbdulRahimda,b,cArshadAyubGraduateBusinessSchool,FacultyBusinessManagement,UniversitiTeknologiMARA,40450ShahAlam,Selangor,MalaysiadFacultyBusinessManagement,UniversitiTeknologiMARA,OffJalanHangTuah,75300Melaka,MalaysiaAbstractCrossbordermergerandacquisition(CBMA)dealsworthoverUS$2billioneveryyearbutfailurerateisbetween70to90percent.Manyresearchershavetriedtoexplainthoseabysmalstatisticsbuttheoutcomesareequivocal.ThisresearchaimstoexaminethedeterminantsofCBMAthataffecttheshareholdervaluecreationofadvancedemergingmarketacquiringfirms.Eventstudyandregressionanalysisareappliedforthestudyperiod2000-2011.Theresultshowssixdeterminantshaveapositiverelationshipwiththeshareholdervaluecreationandarestatisticallysignificantfortheadvancedemergingmarketscenario.©2013TheAuthors.PublishedbyElsevierB.V.Selectionandpeer-reviewunderresponsibilityofICEBR2013.Keywords:Crossbordermergerandacquisition;determinants;eventstudy;regressionanalysis1.IntroductionAshokaandShoko,2001,explainedthatCBMAinAsiancountriessuchasIndonesia,Korea,MalaysiaandThailandrosesharplyinvaluefromUS$3billionin1996toUS$22billionin1999,beforefallingslightlytoUS$18billionin2000.In2004,Japan,ChinaandASEANregionstogetheraccountedfor15.9percentoftheworld’sM&Adealsand7.7percentoftheworld’sM&Atransactionsvalue(RogerandAli,2006).Asiancountriesareforeseeableasthefastergrowingintermsofeconomycomparedtootherregionsintheworldandareplayingimportantrolesintheinternationaltradeandglobalinvestment.Asaresult,therewillbemore*Correspondingauthor.Emailaddress:[e-mail]©2013TheAuthors.PublishedbyElsevierB.V.Selectionandpeer-reviewunderresponsibilityofICEBR201397KamalFahrulrazyRahimetal./ProcediaEconomicsandFinance7(2013)96–102CBMAinvolvingthecompaniesfromAsiancountriesinthefuture.Malaysiaisoneofthedevelopingcountriesthatexperiencedrapidgrowthwhichtransformeditfromanagriculture-basedeconomytoanindustrial-basedeconomy.MalaysiahasbeenclassifiedasanadvancedemergingmarketinJune2011byFTSEGroup.Thisistherecognitionforthecontinuouseffortandcommitmentbythegovernment,regulatorsandmarketparticipantstobuildahighqualitymarketwhichwillattractmoreinvestmentfromglobalinvestors.FordecadesMalaysiahasbeenfollowingprudentmacroeconomicpolicies,focusingonlowinflation,strongexternalreservesandcurrentaccountsurpluses.ThisstudyfocusesonMalaysiaasoneoftheadvancedemergingmarketcountries.2.StatementofProblemInMalaysia,Saiful,2007,urgedthatthereisalackofempiricalresearchontheeconomicconsequencesofthefirmsinvolvedinM&A,particularlyinanemergingmarket.NoneofthestudiesoncorporateM&AactivitiesinMalaysiaiscomprehensivetoconclusivelyestablishtheeconomicgaininM&Aofthebidderandtargetfirms.ShealsosuggestedfutureresearcherslookintoCBMAofMalaysianfirmswhicharealsolacking.HersuggestionissupportedwiththestatementmadebySanjaietal.,2011,ontheveryfewacademicpapersfocusingonthefinancialimpactontheemergingmarketcompaniesofCBMA.TheincreasingtrendtowardCBMAbyfirmsfromemergingmarketandlackofresearchinthisareacreatestheneedtoaddresswhethertheextantconceptualframeworkandempiricalevidenceoninternationalCBMAarerelevantforacquirersoutsidethedevelopedcountries.Therefore,thisstudyistofillintheresearchgapbyexploringthedeterminantswithintheadvancedemergingmarketacquiringfirms,forexample,financialdataassuggestedbySanjaietal.,2011,andexternalfactors,forexample,economicfactorsassuggestedbySaiful,2007.3.LiteratureReviewThereareinconclusivefindingsonshareholdervaluecreationfrommergersandacquisitionsbypreviousresearchers.Connetal.,2005;Blacketal.,2007;andFrancisetal.,2008,foundoutthattheannouncementofcross-borderacquisitionsresultedinpositiveabnormalreturns.Glamouracquirersgeneratedmorevalueincross-borderacquisitionsofpublicfirmswhilevalueandhightechnologyacquirersandahigherculturaldifferenceresultedinagreatervaluecreationinthecross-borderacquisitionofprivatefirms.Meanwhile,GregoryandMcCorriston,2005;MoellerandSchlingemann,2005;Wooster,2006;AybarandFicici,2009,showthattherewasnosignificanteffectrelatingtotheannouncementofacquisitionsonshareholders’wealth.4.ResearchMethodologyAneventstudyiscarriedouttoexaminethesharepricebehaviorofbiddingfirmsandtargetfirmsoverthespecifiedperiodoftime.ThisstudyfocusesonhowsecuritypricesrespondtotheinformationreleasedduringapublicannouncementofaspecificeventofafirminthecaseofM&A.Franksetal.,1977,commentedthatthemarketbeginstoanticipatemergersonaverageofatleast3monthspriortotheannouncementdate.Dailyhistoricalpricesforthestockofacquiringcompaniesaswellasmarketindexareobtainedfromdata-stream.Thesamplecomprises285transactionsofCBMAthroughout2000to2011.From285CBMA,only73transa