Author

  • Shiow-Ying Wen

    • Chang Gung University, Taoyuan, Taiwan
    • Taiwan, Province of China

  • Jean Yu

    • National Chiayi University, Chiayi City, Taiwan
    • Taiwan, Province of China

Abstract

This study investigates the effect of financial deepening, banking stability and market structure on cross-border M&A activity in 13 emerging countries with data covering the period, 2003-2010. We show the empirical results of panel regression by sub grouping portfolio based on whether the firms are acquirer or target to cross-border M&A activity. For acquiring countries, the results show a significantly positive effect of the deepening indicator in cross-border M&A activity. Moreover, bank stability on the acquiring firms investing in the cross-border M&As shows a significantly positive effect. For targeting countries, the results show a significantly positive impact of the deepening indicator in cross-border M&A activity. A positive relation between the ratio of the amount of credit provided by banks and other financial institutions to the private sector to GDP in cross-border M&A activity is found as well. These findings imply that not only financial depth but also banking stability promotes cross-border M&A activity for emerging economies.

Keywords

References

  • Ang, J. & Cheng, Y. (2006). Direct Evidence on the Market-driven Acquisitions Theory. Journal of Financial Research , 29, 199-216.
  • Alexandridis, G., Mavrovitis, C. F. & Travlos, N. G. (2011). How Have M&As Changed? Evidence from the Sixth Merger Wave. European Journal of Finance , 18, 663-688.
  • Baltagi, B. H. (2008). Econometric Analysis of Panel Data . 4th ed. Wiley, John & Sons.
  • Beck, T., Demirguc-Kunt, A. & Levine, R. (2006). Bank Concentration, Competition, and Crises: First Results. Journal of Banking & Finance , 30, 1581-1603.
  • Beck, T. & Demirguc-Kunt, A. (2009). Financial Institutions and Markets Across Countries and Over Time - Data and Analysis. World Bank Policy Research Working Paper Series, No. 4943.
  • Beck, T., Demirgüç-Kunt, A. & Levine, R. (2010). Financial Institutions and Markets Across Countries and Over Time: The Updated Financial Development and Structure Database. World Bank Economic Review, 24, 77-92.
  • Bouwman, C., Kathleen, F. & Amrita, N. (2009). Market Valuation and Acquisition Quality: Empirical Evidence. Review of Financial Studies , 22, 633-679.
  • Di Giovanni, J. (2005). What Drives Capital Flows? The Case of Cross-border M&A Activity and financial deepening. Journal of International Economics , 65, 127-149.
  • Gugler, K., Mueller, D. C. & Weichselbaumer, M. (2012). The Determinants of Merger Waves: An International Perspective. International Journal of Industrial Organization , 30, 1-15.
  • Harford, J. (2005). What Drives Merger Waves? Journal of Financial Economics , 77, 529-560.
  • Hsiao, C. (2003). Analysis of Panel Data. Cambridge University Press.
  • Hsiao, C. (2007). Panel Data Analysis - Advantages and Challenges. Test , 16(1), 1-22.
  • Jovanovic, B. & Rousseau, P. (2002). The Q-theory of Mergers. American Economic Review , 92(2), Papers and Proceedings, 198-204.
  • Jovanovic, B. & Rousseau, P. (2008). Mergers as Reallocation. Review of Economics and Statistics , 90(2), 765-776.
  • Klein, M. W. & Olivei, G. P. (2008). Capital Account Liberalization, Financial Depth, and Economic Growth. Journal of International Money and Finance , 27, 861-875.
  • King, R. & Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right. Quarterly Journal of Economics , 108(3), 717-737.
  • Mitchell, M. & Mulherin, J. H. (1996). The Impact of Industry Shocks on Takeover and Restructuring activity. Journal of Financial Economics , 41, 193-229.
  • Rhodes-Kropf, M. & Viswanathan, S. (2004). Market Valuation and Merger Waves. Journal of Finance , 59, 2685-718.
  • Rhodes-Kropf, M., Robinson, D. T. & Viswanathan, S. (2005). Valuation Waves and Merger Activity: The Empirical Evidence. Journal of Financial Economics , 77, 561-603.
  • Shleifer, A. & Vishny, R. (2003). Stock Market Driven Acquisitions. Journal of Financial Economics , 70, 295-311.
  • United Nations Conference on Trade and Development (UNCTAD). (2012). World Investment Report 2012: Towards a New Generation of Investment Policies. United Nations. Available from Internet: http://unctad.org/en/PublicationsLibrary/wir2012_embargoed_en.pdf

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Wen, S.-Y., & Yu, J. (2014). Financial Deepening, Banking Stability and Cross-border M&A Activity - Evidences from Emerging Countries. Journal of Economics and Behavioral Studies, 6(10), 810-823. https://doi.org/10.22610/jebs.v6i10.540

Share this article

License

Copyright (c) 2014 Shiow-Ying Wen, Jean Yu (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 6 No. 10 (2014) Construction, Employment & Social Value View issue contents

Published

2014-10-30

Submissions

Have research to publish? Journal of Economics and Behavioral Studies welcomes submissions.

Make a Submission