Emerging market acquisitions - Intriguing, but what are the shareholder value effects?

Abstract: Although executives and boards argue in favour of the extensive benefits of acquisitions in emerging markets, theory and research suggests that not only benefits but also costs and valuation issues are accentuated when making acquisitions in emerging markets. The aim of this thesis is to add to the existing research by studying the shareholder value effects following acquisitions in emerging markets by developed market firms. The data sample consists of 1,079 acquisitions between 2000 and 2013 of which 144 were undertaken in emerging markets. Following short and long run event studies, results suggest that investors initially expect shareholder value to be created but that these expectations are reversed to shareholder value destruction in the months following the acquisition. Furthermore, results do not support a difference in shareholder value creation between acquisitions in emerging and developed markets. This thesis and its findings contribute to the existing body of research in primarily two ways. Firstly, the significant difference between emerging and developed market acquisitions documented in previous research, is not found to be robust when restricting the sample of developed market acquisitions to only include cross border deals. Secondly, the findings of this thesis contrast to the positive long term performance suggested by previous researchers and thus open up for further research.