The Determinants of M&A Operating Performance: Evidence from Deals in Developed and Emerging Capital Markets

This paper aims to test whether M&A deals influence the operating performance of combined companies and to compare how determinants in emerging markets influence the M&A performance and how they influence the M&A performance in developed countries. Author analyses 125 deals initiated by the acquirer from emerging markets and 153 deals initiated by the acquirer from developed markets in the period between 2003 and 2013. Based on accounting method, the author finds that M&A deals influences negatively the performance of combined companies in emerging and developed markets. Furthermore, the determinants of M&A operating performance are studied. The explanatory variables analysed in this article are: method of payment (cash/stock), cross-border/locals deals, diversified/focused deal, crisis period. In developed markets stock financed transactions perform better than cash financed. Cross-border deals perform better in developed capital markets than local deals. Among deals from emerging markets, during the crisis M&A deals are more efficient than in other periods but deals from developed markets show the opposite result concerning influence of crisis period.