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The Influence of Corporate Life Cycle Stages on the Probability of Participation in M&A Deals in Developing Capital Markets
Nowadays developing capital markets are the main drivers of the market for corporate control and their percentage in total market value of mergers and acquisitions (M&A) deals increases annually. Severe competition between companies leads to the growing popularity of M&A as a strategy. It becomes necessary for managers to understand the factors which influence the probability of a company to participate in M&A. For today in academic literature there is no consensus about what factors determine the probability of a company to participate in M&A deals. Determinants of company’s M&A activity seem to be the issue of current importance.During the corporate life cycle there are changes in most company’s financial indexes. That is why the corporate life cycle stage may have a significant influence on the possibility of a company to take part in M&A. Thus, the main aim of this study is to analyze the influence of corporate life cycle stages on the probability of a company to participate in M&A deal from the perspective of acquiring firms in the developing capital markets. Hence, a set of research tasks consists of nine goals connected with examination of theoretical background, basic methodological approaches and empirical research.In the theoretical part of research five determinants of the probability of a company to participate in M&A have been selected. The possible causes of different impacts of these determinants have been identified depending on a life cycle stage. As it is known, BRICS countries are the main drivers of M&A market and count for the major part of all M&A deals in emerging markets. Thus, BRICS countries have been selected for future analysis.In this study for the identification of corporate life cycle stage the modified methodology of Anthony and Ramesh (Anthony, Ramesh, 1992) has been used. The application of this methodology to the emerging capital markets requires some specific adjustments of the indicators which are used in the original model. To study the influence of corporate life cycle stages on the probability of a company to participate in M&A two logistic regressions have been used. This approach allowed to reveal the total change in the probability of a company to participate in M&A, as well as changes in determinants of this probability at the various life cycle stages.The empirical evidence from the sample of BRICS listed companies during the period from 2010 to 2013 shows the significant differences in the probability to participate in M&A deal as a buyer on the different life cycle stages. The possibility of a company to participate in M&A declines from stage to stage during the corporate life cycle. Moreover, the different influence of the same factors at various life cycle stages has been proved empirically.