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The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises
Affiliation:1. University of International Business and Economics, No. 10 Huixin East Street, Chaoyang District, Beijing, China, 100029;2. College of Business, Florida International University;3. Kelley School of Business, Indiana University;4. Shandong University, No. 27 Shanda Nanlu, Jinan, Shandong, China, 250100;5. Peking University, No.5 Yiheyuan Road, Haidian District, Beijing, China, 100871;1. Department of Accounting, Finance and Economics, Salford Business School, Maxwell Building, University of Salford, The Crescent, Salford, Manchester M5 4WT, UK;2. Department of Logistics, Marketing, Hospitality and Analytics, Huddersfield Business School, University of Huddersfield, Queensgate Road, Huddersfield HD1 3DH, UK;1. Faculty of Accounting, Shanxi University of Finance and Economics, Taiyuan, China;2. Business School, The University of Hong Kong, Hong Kong, China;3. Department of Business, University of Wisconsin-Parkside, 900 Wood Road, Kenosha, WI, 53141, USA;1. Vienna University of Economics and Business, Department of Global Business and Trade, Welthandelsplatz, 11020, Vienna, Austria;2. St. Petersburg State University, Graduate School of Management, Volkhovsky per. 3, St. Petersburg, Russia;1. Business School, University of Huddersfield, Huddersfield HD1 3DH, UK;2. Leeds University Business School, University of Leeds, Leeds LS2 9JT, UK;3. School of Economics and International Trade, Hunan University Changsha, Hunan, 410079, China;1. Monte Ahuja College of Business, Cleveland State University, Cleveland, OH 44115, USA;2. Robert B. Willumstad School of Business, Adelphi University, Garden City, NY 11530, USA
Abstract:
This study builds on insights from mergers and acquisitions (M&A) studies and the perspective that stock market performance is affected by the M&A strategies of firms. Past studies show that acquisitions are an effective way to exploit existing knowledge and explore new possibilities. We argue that stock market performance can be a response to exploration/exploitation strategies in the context of cross-border M&As by emerging market multinationals. Based on cross-border M&A data of Chinese multinationals, we find that exploration-oriented acquisitions have worse stock market performance than exploitation-oriented acquisitions. Furthermore, we find support for our premise that acquiring firms can reduce the risk of exploration-oriented acquisitions by having more high-discretion slack resources or by maintaining a high level of equity share of the target firm. In addition, acquiring firms perform better if they conduct exploration-oriented acquisitions in related industries. Our results contribute to a better understanding of exploration and exploitation in the context of M&As.
Keywords:Exploration-oriented acquisitions  Exploitation-oriented acquisitions  Performance  Emerging market MNEs  China
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