Filling institutional voids in emerging economies: The impact of capital market development and business groups on M&A deal abandonment

Abstract

Business groups may fill institutional voids in emerging economies, but empirical research is lacking as to when and how institutional voids affect economic behavior of individual firms. We examine the effect of institutional voids in capital markets on individual transactions in emerging economies, focusing on M&A deals that were abandoned after being publicly announced. M&A deals may fall through when unexpected information is brought to light or financing difficulties arise. At the country level, capital market development can lower the probability of M&A deal abandonment by facilitating the flow of information and capital. At the firm level, when acquirers are affiliated with business groups, development of internal capital markets can also lower this probability, facilitating completion of the transaction and the flow of information. This effect of business groups, however, decreases as the external capital market, the institution replaced by their internal markets, develops and its benefits become widely available to non-business groups. The results of our empirical analyses on M&A transactions in nine emerging economies over 21 years support our arguments.

Résumé

Des groupes d’entreprises peuvent remplir des vides institutionnels dans les économies émergentes, mais la recherche empirique ne permet pas de savoir quand et comment les vides institutionnels influencent le comportement économique des firmes individuelles. Nous étudions l’effet des vides institutionnels dans les marchés de capitaux sur les transactions individuelles dans les économies émergentes, en nous focalisant sur les opérations de fusion et d’acquisition (FA) qui ont été abandonnées après avoir été annoncées publiquement. Les opérations de FA peuvent échouer lorsque des informations inattendues sont communiquées ou lorsque des difficultés de financement apparaissent. Au niveau des pays, le développement du marché des capitaux peut diminuer la probabilité d’abandon d’opérations de FA en facilitant le flux d’informations et de capitaux. Au niveau de la firme, lorsque les acquéreurs sont affiliés à des groupes d’entreprises, le développement de marchés internes de capitaux peut également diminuer cette probabilité, facilitant la réalisation de la transaction et le flux d’informations. Cet effet des groupes d’entreprises décroît cependant lorsque le marché externe de capitaux, l’institution remplacée par leurs marchés internes, se développe et lorsque ses bénéfices deviennent largement accessibles à des groupes qui n’associent pas des entreprises. Les résultats de nos analyses empiriques sur des transactions de FA dans neuf économies émergentes sur une période de 21 ans valident nos arguments.

Resumen

Los grupos empresariales pueden llenar vacíos institucionales en economías emergentes, pero la investigación empírica es ausente respecto a cuándo y cómo los vacíos institucionales afectan el comportamiento económico de firmas individuales. Examinamos el efecto de vacíos institucionales en mercados de capitales en transacciones individuales en economías emergentes, enfocándonos en fusiones y adquisiciones que fueron abandonadas después de haber sido anunciadas públicamente. Los acuerdos de fusiones y adquisiciones pueden sucumbir cuando información inesperada es traída a la luz o al surgir dificultades de financiación. A nivel país, el desarrollo del mercado de capitales puede disminuir la probabilidad del abandono del acuerdo de fusión y adquisición mediante la facilitación de información y de capital. A nivel de la empresa, cuando los adquirientes están afiliados a grupos empresariales, el desarrollo de los mercados de capitales interno puede también disminuir esta probabilidad, facilitando la finalización de la transacción y el flujo de información. Este efecto de grupos empresariales, sin embargo, disminuye con el mercado de capital externo, la institución es reemplazada por los mercados internos, se desarrolla y sus beneficios se vuelve disponibles de manera más amplia a grupos no empresariales. Los resultados de nuestro análisis empíricos de transacciones de fusiones y adquisiciones en nueve economías emergentes en 21 años apoya nuestros argumentos.

Resumo

Os grupos de negócios podem preencher os vazios institucionais nas economias emergentes, mas a pesquisa empírica é incompleta a respeito de quando e como vazios institucionais afetam o comportamento econômico das empresas individuais. Nós examinamos o efeito dos vazios institucionais nos mercados de capitais em transações individuais em economias emergentes, com foco em fusões e aquisições que foram abandonadas depois de terem sido publicamente anunciadas. Fusões e aquisições podem naufragar quando alguma informação inesperada é trazida à tona ou quando surgem dificuldades de financiamento. Ao nível de país, o desenvolvimento do mercado de capitais pode diminuir a probabilidade do abandono de fusões e aquisições pela facilitação do fluxo de informações e de capital. Ao nível de empresa, quando adquirentes são filiados a grupos de negócios, o desenvolvimento de mercados de capitais internos também pode diminuir essa probabilidade, facilitando a conclusão da transação e o fluxo de informações. Este efeito dos grupos de negócios, no entanto, diminui à medida que o mercado de capitais externo, a instituição substituída por seus mercados internos, se desenvolve e seus benefícios se tornam amplamente disponíveis para os que não são grupos de negócios. Os resultados de nossas análises empíricas sobre transações de fusões e aquisições em nove economias emergentes durante 21 anos apoiam nossos argumentos.

概要

商业集团可能可以填补新兴经济体内的制度空隙,但体制空隙何时以及如何影响单个企业的经济行为的实证研究缺乏。我们通过关注那些被公开宣布后而被放弃的并购交易,研究了资本市场的制度空隙对新兴经济体单个交易的影响。并购交易在意想不到的信息被曝光或融资出现困难的时候可能会落空。在国家层面上,资本市场的发展可以通过促进信息流和资金流降低并购交易被放弃的概率。在公司层面上,当收购方隶属于商业集团,内部资本市场的发展可以降低该概率,促进交易的完成和信息的流动。然而,商业集团的这种影响随着外部资本市场,即被它们内部市场取代的制度的发展而减少,且其效益可为非商业团体广泛获得。我们对跨越21年的九个新兴经济体并购交易的实证分析的研究结果支持我们的论点。

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Kim, H., Song, J. Filling institutional voids in emerging economies: The impact of capital market development and business groups on M&A deal abandonment. J Int Bus Stud 48, 308–323 (2017). https://doi.org/10.1057/s41267-016-0025-0

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Keywords

  • institutional environment
  • emerging markets/countries/economies
  • business groups
  • institutional voids