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Macroeconomic factors and firm’s cross-border merger and acquisitions

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Abstract

This study investigates the impact of macroeconomic variables on the wealth effects of cross-border acquisitions by Malaysian multinational companies. The sample consists of 159 cross-border acquisitions by Malaysian MNCs bidding in 22 countries around the world from 2000 to 2007. The macroeconomic variables examined in this study are foreign economic condition, GNP correlation between countries, and level of economic development of target country. The findings indicate that, foreign economic condition affects the wealth effect negatively, while the level of economic development of target country affects the wealth effect positively. Aside from the macroeconomic variables, we also find that English or non-English language, government’s rules index and the telecommunication infrastructure all play certain roles in the Malaysian cross-border acquisitions. Implied from this study is that, value creation of the Malaysian cross-border acquisitions is a function of the foreign economic condition and the level of economic development of the target foreign country.

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Notes

  1. Malaysian OFDI can be said to be relatively new compared to those from developed nations. As such Malaysia, hopes to see more researchers studying the FDI by Malaysian MNCs in future. According to Ariff and Lopez (2008), among the notable studies on Malaysian OFDI are Ragayah (1999), Tham (2006) and Syed-Zambri and Kitchen (2008).

  2. Two recent studies that analyse the determinants of foreign M&A from developing nations (Kling and Weitzel 2010; Aybar and Ficici 2009) did not focus on macroeconomics factors, but only focus on firm’s specific factors.

  3. Refers to private companies in which residents have equity stake of more than 50 %.

  4. The Breusch-Pagan test rejects the presence of homoskedascity and supports the existence of heteroskedascity in the cross-sectional data employed.

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Correspondence to Carl B. McGowan Jr..

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Bany-Ariffin, A.N., Hisham, M. & McGowan, C.B. Macroeconomic factors and firm’s cross-border merger and acquisitions. J Econ Finan 40, 277–298 (2016). https://doi.org/10.1007/s12197-014-9304-4

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