Cross Border Mergers and Acquisitions in Emerging Markets: The Stock Market Valuation of Corporate Control

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Abstract
Using a database that covers all transactions that involve a developed-market acquirer and an emerging-market target from 1988-2002, this paper studies the stock market's reaction to acquisition announcements in emerging markets. The evidence suggests that the stock market anticipates significant value creation from cross border acquisitions of emerging market targets. Panel data estimations show that, on average, monthly returns for target firms increase by 5.05 to 6.68 percent in alternative specifications when a cross border acquisition is announced, while acquirer returns increase, on average, by 1.65 to 3.05 percent. The benefits of the acquisitions stem from the transfer of majority control from emerging market targets to developed market acquirers. Overall, the results suggest that the boom in cross border mergers and acquisitions in emerging markets in the late 1990s led to substantial gains for shareholders of both acquiring and target firms.

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