Currency and Valuation Effects on Cross-Border Mergers and Acquisitions

Abstract: This thesis explores the impact of micro- and macroeconomic factors on cross-border merger and acquisition (M&A) decisions, focusing on the influence of currency movements and firm valuations. Employing a quantitative approach, it examines foreign investors' attitudes towards economies with depreciating currencies, hypothesizing that firms in financially stronger countries are more likely to acquire firms in weaker economies. The study controls for variables like GDP growth, corporate income tax, sales growth, and firm solvency, covering both public and private firms. Key findings reveal a positive impact of long-term firm valuation on cross- border M&A propensity and a complex role of solvency, especially for private firms. The thesis underscores the need for further research on the effects of currency differences and other macroeconomic factors on FDI, offering insights into the intricacies of cross-border M&As in diverse economic scenarios.