Cross-Border Mergers & Acquisitions

: does labour matter?

Abstract

We implement a 2-state Market Model using a first-order Markov Switching Process to study the generation of abnormal returns in a cross-border M&A setting. We find that emerging market acquirers earn a positive and statistically significant abnormal return of 1,16% when achieving control of frontier market targets, and developed market acquirers earn a positive and statistically significant abnormal return of 1,06% when achieving control of emerging market targets. Furthermore, we propose that labour laws play a significant role in generating abnormal returns in a crossborder M&A setting. When control is acquired, we find that social security law differences between countries are associated with higher abnormal returns in a developed market – emerging market setting, and labour law differences are associated with higher abnormal returns in an emerging market – emerging market setting. We argue that these results reflect efficiency improvements at the level of social security cost reduction and faster employment adjustments to cyclical industries, and effectiveness improvements at the level of the productive output of labour forces, given the managerial expertise of the top management of acquiring firms.

Date of Award	18 Jul 2017
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Pramuan Bunkanwanicha (Supervisor)