International Mergers and Acquisitions in BRICS versus Developed Markets. A Comparative Study of Different Investment Policies

International Mergers and Acquisitions in BRICS versus Developed Markets. A Comparative Study of Different Investment Policies

Maggio 2016
30 pagine
978-88-­6856-­068-­3

The primary purpose of this study is to determine the optimal Investment policy for
multinational companies from a growth perspective between retaining and distributing
the Realized earnings within their subsidiaries, according to the location where M&As
are executed, BRICS or Developed countries. The main research question aims to
understand whether a higher Retention ratio is meaningful to explain a corresponding
higher growth rate. A sample of representative cross-border deals was obtained for the
years 2005-2013. There is no evidence of a significant relationship between the
Retention ratio and growth rate, expressed in terms of sales volume, when evaluating a
general M&A context without taking into account the place where deals occur.
However, a positive relationship holds between the two variables for those cross-border
transactions with targets located in BRICS markets. This means that the fundamental
determinant to experience an incremental growth after an M&A strategy, thanks to the
retain-and-reinvest approach in earnings management, is the target’s belonging or not
belonging to BRICS countries.