عملکرد کارفرمایان فراوان: شواهد حاصل از بازارهای نوظهور

This study examines the returns to 2340 merger deals conducted by 1122 frequent acquirers in 17 emerging markets, during the period 1985 to June 2008. Our primary findings are as follows. Serial acquirers in emerging countries on average experience a declining pattern in returns with subsequent deals, but the pattern is not strong. However, conditional on successful initial deals, the declining pattern is strong for the majority of countries, is large in terms of the magnitude, and is significant in the multivariate regression analysis. We interpret the results as somewhat supportive of the hubris behavior as a factor in serial acquisitions (Roll, J Business 59, 1986). We also find a stronger declining pattern for more developed markets but no substantial difference between civil and common-law countries; the former might be explained by generally greater and increasing competition for control in more developed markets.

The performance of frequent acquirers has been a well-researched subject, which is not surprising given that their performances have important implications for managerial ability and behavioral tendency. It is noteworthy that many studies find that returns to acquiring firms decline as these firms buy more targets; these studies include Fuller, Netter, and Stegemoller (2002), Guest, Cosh, Hughes, and Conn (2004), Aktas, de Bodt, and Roll (2007), Doukas and Petmezas (2007), Ahern (2008), Billett and Qian (2008), Ismail (2008), and Croci and Petmezas (2009). Most of these studies point out that this declining return pattern, especially when the first acquisition was successful, can be consistent with the hubris hypothesis first proposed by Roll (1986): Roll hypothesizes that over-confident or over-optimistic managers might tend to pay too much for targets. Malmendier and Tate (2008) also argue that the existence of over-confident managers can lead to bad acquisitions. If managers gain more confidence after early successful acquisitions, it could explain the declining pattern in returns to acquirers. However, some of these studies such as Guest et al. (2004) and Aktas et al. (2007) point out other factors that can also account for a declining pattern in returns; for example, the declining pattern might be explained by a diminishing pool of good targets, costs of integrating targets, and learning effects. All of the above studies examine either the United States or United Kingdom merger markets. This paper extends the literature by analyzing frequent acquirers in emerging markets. Analyzing frequent acquirers in emerging markets can provide additional insights for several reasons. First, country factors might affect merger decisions to a greater degree in emerging markets. In a study of factors influencing corporate governance across countries, Doidge, Karolyi, and Stulz (2007) compare the relative importance of firm characteristics and country characteristics, with the latter including legal protections for minority investors and the level of economic and financial development. They find that country factors are very important, especially for emerging markets. They state that “we show that firm characteristics explain almost none of the variation in governance ratings in less-developed countries…” Since merger decisions are affected by corporate governance, their finding suggests that country characteristics may also play a very important role in merger decisions in emerging markets. Moreover, several cross-country studies find that mergers1 are affected by country factors such as investor protection (Boubakri et al., 2008 and Rossi and Volpin, 2004), competition for corporate control (Alexandridis, Petmezas, & Travlos, 2010), and the extent of market development (Croci & Petmezas, 2010). Consequently, we examine differences in reactions to serial acquisitions between countries practicing civil and common-law systems and between more and less developed markets.2 Second, there are relatively more family or tightly controlled firms in emerging markets, so outside monitoring might be less effective3; if so, hubris-infected managers might be less disciplined. Stated differently, mergers affected by hubris may be more common in emerging markets, thereby suitable to test the hubris hypothesis. Third, firms in emerging markets make acquisitions less frequently than those in the U.S. and U.K., so complicating factors such as learning and diminishing targets might be of less influence here.4 Finally, capital markets in emerging countries are generally characterized by high information asymmetry5 (Bhattacharya and Daouk, 2002 and Jin and Myers, 2006), market illiquidity (Lesmond, 2005), and poor investor protection (Djankov et al., 2008 and Dyck and Zingales, 2004). These may alter the documented performance pattern for repeat acquirers, so it is worthwhile to examine whether declining returns also hold in emerging markets. An additional reason for taking up the issue is the recent phenomenal growth in mergers and acquisitions (M&As) in emerging markets. It appears that market liberalization of many emerging countries has provided incentives for firms to become more engaged in acquisitions. Recent data from Securities Data Company's (SDC) World-Wide M&As data base indicates that the acquisitions undertaken by firms from emerging countries have become more intense. The total value of M&A transactions increased from $10.47 billion in 1990 (4% of total value of world M&A transactions) to $189.8 billion in 2007 (11% of total value of world M&A transactions), a 17-fold increase during the period of 1990–2007. Additionally, Flanagan, Milman, and D'Mello (1997) show that M&As activity in Latin America by local and international acquirers increased tenfold between 1984 through 1994 due to the introduction of new economic and investment policies in these markets. In sum, major objectives of this study are 1) to examine deal characteristics and the market reaction to frequent acquirers' merger announcements in emerging markets, and 2) to analyze whether cross-country variations in frequent acquirers' returns can be explained by differences in the legal systems and differences in the extents of market development. Countries practicing common law tend to be associated with a greater level of investor protection than those of civil law (La Porta et al., 1997, La Porta et al., 1998 and La Porta et al., 2000). Markets with higher development tend to be associated with greater market monitoring. Consequently, if hubris affects merger decisions, we would expect managers in common-law countries and in more developed markets to be more disciplined and controlled. That is, we expect the pattern of acquirers' declining returns to be less pronounced in common-law countries and in more developed markets. However, the higher degree of competition in more developed markets suggests that hubris-infected managers are less likely to prosper, implying that hubris behavior might be less relevant in these markets. The sample in this study includes 2340 deals in 17 emerging markets, during the period 1985 to June 2008. Our main findings are as follows. For the vast majority of countries, acquirers' returns decrease in subsequent deals, but significantly so for only one country. However, when analyzing only firms with successful first acquisitions, the declining pattern is significant and strong for 10 countries. In general there is no substantial difference in declining patterns between civil and common-law countries. The declining pattern tends to be stronger for more developed markets. An additional analysis of merger premium with a small sample produces mixed results. Overall, the evidence is somewhat supportive of hubris as a factor in the merger markets in emerging countries. There is also some evidence suggesting that competition for corporate control may be another factor. The remainder of the paper is organized as follows. Section 2 provides a review of related literature. Section 3 describes the data and the sample. Section 4 discusses the empirical results regarding market reactions to serial acquisitions, and Section 5 presents additional analyses. The concluding remark is offered in Section 6.

In this paper, we examine 2340 merger deals by 1122 frequent acquirers in 17 emerging markets, during the period 1985 to June 2008. In general, serial acquirers in these countries make fewer deals than those in the U.S. and U.K. Acquirers generally experience a declining pattern in returns with subsequent deals, but the evidence is less than overwhelming. In particular, acquirers' returns demonstrate a significant decline from the 1st deal to 2–3 deals in only one country: South Korea, which happens to be the most active country in terms of the number of deals. The declining pattern is stronger for civil-law countries and markets characterized by higher degrees of development. A regression analysis that controls for other factors produces essentially the same results, except that the difference between civil and common-law countries is not strong. We also find a difference between target types: compared to other target types, acquisitions of public targets do not appear to be associated with any systematic patterns in abnormal returns. More striking results are that, conditional on the success of the 1st deal, the declining pattern is stronger for the majority of countries (10), is greater in terms of the magnitude of decline, and is more significant in the multivariate regression analysis, compared to the unconditional analysis. Overall, the evidence is somewhat supportive of the hubris behavior as a factor in serial acquisitions. Not all evidence is supportive of the hubris hypothesis, however. In particular, we find almost no difference in patterns between civil and common-law countries. This is inconsistent with the hubris hypothesis because managers domiciled in civil-law countries arguably are less disciplined and therefore might be more vulnerable to hubris behavior. Moreover, we find that the declining pattern tends to be stronger for markets characterized by greater degrees of development. This is hard to be explained by the hubris hypothesis because managers in more developed markets should be more disciplined and less likely to be infected by over-confidence. To some extent, this result is not surprising because the higher degree of competition in these markets means that hubris-infected managers are less likely to prosper there. Instead, this result might be explained by a generally greater degree of competition for corporate control in more developed markets. Specifically, competition for good targets is stronger and increasing over time in these markets, hence returns are decreasing for frequent acquirers. This interpretation is in agreement with the finding of Alexandridis et al. (2010), who conclude that merger premium is influenced by the degree of competition for corporate control around the world. Additional analyses on merger premium and time-between-acquisitions also produce results that are inconsistent with the hubris hypothesis; however, these additional analyses might suffer from small sample and measurement problems. In conclusion, we find some evidence that hubris behavior and competition affect mergers conducted by frequent acquirers in emerging markets. There is probably no single factor that can completely capture the behavior of frequent acquirers in all emerging markets.