Internationalization, Regulation, and Diversification Effect in Cross-border M&A : Evidence from KOSPI Market
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This study analyzes the effect of target country’s internationalization level difference and institutional regulation on the diversification and the acquirer’s wealth of cross-border M&A. Through an examination of data on 346 acquiring firms in the Korean market from 2000 to 2019 and their 49 target countries, we find that the smaller the difference of the internationalization level between the acquiring and target countries, the bigger the positive effect on the acquirer’s wealth, as well as on the diversification effect. We also find that the smaller the institutional regulation of trade and investment of the target country, the more positive effect on the wealth of the acquirer. This study provides insightful implications that the country’s internationalization level and regulations could be a strong determinant of M&A decisions in emerging markets.
Abstract
This study analyzes the effect of target country’s internationalization level difference and institutional regulation on the diversification and the acquirer’s wealth of cross-border M&A. Through an examination of data on 346 acquiring firms in the Korean market from 2000 to 2019 and their 49 target countries, we find that the smaller the difference of the internationalization level between the acquiring and target countries, the bigger the positive effect on the acquirer’s wealth, as well as on the diversification effect. We also find that the smaller the institutional regulation of trade and investment of the target country, the more positive effect on the wealth of the acquirer. This study provides insightful implications that the country’s internationalization level and regulations could be a strong determinant of M&A decisions in emerging markets.
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