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LEAD KINDLY LIGHT? A BLENDED NEO-CLASSICAL AND BEHAVIOURAL CONTEXT OF MERGER WAVES IN EMERGING MARKETS

, Ashok Banerjee
Published in ACRN Publishing House
Volume: 2
   
Abstract

The preferred mode of payment in M&A deals in the emerging markets is cash, primarily due to high ownership concentration. Such markets are characterized by institutional voids, such as lack of investor protection, under-developed debt markets and lack of access to bank funding for M&A deals. These features close-out equity and debt mis-valuation routes for merger waves to occur in these markets. However, conscious policy decisions (often deregulatory) at the aggregate and the industry level give impetus to firms in some industries to restructure, and such restructuring at the industry level generally clusters in time, causing merger waves. Moreover, there are certain behavioural causes like herding, envy and hubris, which can also drive merger waves. We observe that industry-shock thesis embedded in the neo-classical explanations and the ‘anchor acquirer’hypothesis embedded in the behavioural theory explain merger waves at the industry level. Additionally, we lead an inquiry in to the ethnic background of promoter-managers in the context of merger waves, and study its impact on bidder returns, and also analyse the herd behaviour of bidders at the aggregate level.

About the journal
JournalACRN Proceedings in Finance and Risk Series ‘13: Proceedings of the 13th FRAP Conference in Cambridge
PublisherACRN Publishing House
Open AccessNo