Influences Of Firm And Macro Level Determinants On The Probability Of Cross Border Mergers And Acquisitions

Master's Thesis from the year 2015 in the subject Business economics - Investment and Finance, grade: 8,5, Erasmus University Rotterdam (Rotterdam School of Management), language: English, abstract: While the influences of macro-level determinants on cross-border transactions have been investigated in several studies before, firm-level determinants have mostly been excluded in those studies. This study finds that firm-level determinants have a substantial influence on the probability a firm’s decision to acquire a company in a foreign country. The result is even more pronounced in transactions where the acquirer’s and the target’s business operations are related to each other. In unrelated transactions, it was found that acquirers are more influenced by domestic and foreign stock market valuations as well as the relative value of their currency. This seems to proof the fire-sale theory as well as the risk reduction through diversification theory. It is concluded that unrelated transactions are more opportunistic, while related transactions are based on firm-specific business strategic reasons. A firm’s amount of excess cash has been included as a firm-level determinant into the probit model of this study. This variable is fairly new to this kind of studies and its results offer deeper insights into the relationship between transaction probability, determinants and relatedness. This study extents the existing body of academic literature on cross-border mergers and acquisitions by investigating firm- as well as macro-level determinants, while simultaneously taking the relatedness between the transaction parties into account. In order to verify the results, further research into this area is strongly encouraged.