The 2007–2008 Global Financial Crisis, and Cross-border Mergers and Acquisitions

Abstract

Many interdisciplinary studies of the 2007-2008 global financial crisis examine the causes of crisis, corporate governance and firm value, stock market efficiency, new firm registration, macroeconomic performance, and compare this crisis to previous crises. However, we do not find conceptual (empirical) studies that study foreign mergers or acquisitions with respect to the financial crisis. In this exploratory study, we perform an investigation using the UNCTAD's dataset of worldwide cross-border mergers and acquisitions (CB-M&As). We select 26 countries and employ the adjusted event-study method to find significant difference between the means of pre-crisis period (2004)(2005)(2006) and post-crisis period (2008-2010) for both sales and purchases in three variables, namely, number of deals, deal value, and average deal value. Our results show that the 2007-2008 global financial crisis has negatively affected both CB-M&A sale and purchase transactions all over the world from 2008 to 2009. We found, however, that after the crisis period, emerging market countries have taken advantage of the attractive asset prices in developed countries and increased their foreign acquisitions. Lastly, we offer "crisis-related CB-M&A propositions" that would facilitate future hypotheses testing, empirical studies, and policy-making research.

Macroeconomic Change, and Cross-Border Mergers and Acquisitions: The Indian Experience, 1991-2010

“…I observe the declining trend for the number of deals and value in the world economy and India during two time zones such as 2001-03 and 2008-09. I eventually remark that corporate restructuring and M&A activities have affected adversely by the recent 2007-08 global financial crisis (Reddy, Nangia, & Agrawal, 2014b). For example, in case of a number of deals and valuenegative growth for the world economy and India has noticed in 2009, but rose in 2010.…”

“…From the year 2007, Indian MNCs has invested the highest amount of equity/cash to buy global entities in various developed and developing markets. In the event of 2007-08 global financial crisis, Indian firms are even able to purchase foreign firms because of under valuation of target assets and easy availability of debt financing from Indian-based overseas investment bankers (Reddy et al, 2014b).…”

Market for Corporate Control and Contractual Buyout (CoBO): A New 'Collective Ownership-and-Administrative' Strategy

“…Second, academic contributions on various key issues such as restructuring economies, synergies of alliances, partnerships, M&A, and buyouts in diverse institutional environments notice that acquisition, alliance, collaboration, or buyout alternatives improve corporate growth especially in larger firms (e.g., Elango and Pattnaik, 2011;Fjeldstad et al, 2012;Slangen, 2011;Wang and Zajac, 2007;Wiersema and Liebeskind, 1995). Third, studies on foreign market entry strategies in various societal settings describe that acquisitions, greenfiled investments, and buyouts are important entry modes in emerging nations (e.g., Chen and Hennart, 2004;Harzing, 2002;Hennart and Reddy, 1997;Meyer et al, 2009;Reddy et al, 2014aReddy et al, , 2014bWright et al, 2002). Fourth, increased of awareness, and budding research on corporate entrepreneurship in the last decade report that buyouts create opportunities thus improves financial performance via entrepreneurship mode (e.g., Ragozzino and Reuer, 2010;Zahra, 1991).…”

Institutional Laws, and Mergers and Acquisitions in India: A Review/Recommendation

“…Based on previous year's world investment reports, we realize that there is a considerable increase in international investments, where it is being reversed from emerging markets to developed markets. This investment behavior was identified in the aftermath of the 2007-08 global financial crisis due to lower asset valuations, attractive investment and tax policies offered by the host country, and home country institutional constraints with regard to inward overseas investment (Reddy et al, 2014b).…”