Abstract

We examine the impact of cross-border mergers in emerging and developed markets on shareholders wealth between 1988 and 2008. In addition to the acquiror gains that have been discussed by number of prior researches, we also looked at the target and combined returns in order to present a more complete picture. Our results confirm that developed market acquirors gain on average 1.56% more when they acquire emerging market targets as compared to when they acquire targets in developed markets. We also find that emerging market targets' shareholder values are not maximized when acquired by developed market acquirors. Furthermore, we observe that no matter the acquiror's origin, developed market targets experience greater average cumulative abnormal returns than emerging market targets. We conjecture that at least a part of the positive acquiror returns cannot be attributed to the transfer of superior governance practices or intangibles as suggested by Chari, Ouimet and Tesar (2010). Moreover, our results indicate that the sophistication level of the acquiror and the target as well as their relative bargaining ability might be important determinants of the sharing of gains.