Determinants of Cross-Border M&As in Developing Countries. Investments in the BRICS Countries

Table of Contents

1 Introduction

2 Importance of inbound cross-border M&As

2.1 Definitions and classifications

2.2 Theory-based explanation of cross-border M&As

2.3 Global trend and consequences of cross-border M&As

3 Analysis of country-specific determinants of inbound cross-border M&As

3.1 Macroeconomic environment

3.1.1 Economic development

3.1.2 Tax incentives

3.1.3 Labour compensation

3.2 Political and institutional environment

3.2.1 Governance quality and corruption

3.2.2 Accounting standards

3.3 Financial market environment

3.4 Level of human capital

3.5 Target country’s openness

4 Econometric analysis

4.1 Data description and preparation

4.1.1 Dependent variable

4.1.2 Independent variables

4.2 Research model

4.3 Descriptive statistics

4.4 Results

4.4.1 Baseline results

4.4.2 Robustness test and additional analysis

5 Conclusion

Objectives and Topics

This master's thesis investigates the country-specific determinants of inbound cross-border mergers and acquisitions (M&As) within developing economies, specifically focusing on the BRICS countries (Brazil, Russian Federation, India, China, and South Africa) during the period 1990-2018. The research aims to identify which factors—such as macroeconomic stability, institutional quality, and financial market development—influence the volume of inbound M&A activity, thereby providing insights for policy makers and corporations to better understand and manage foreign investments.

• The impact of macroeconomic variables, including GDP and tax incentives, on M&A volumes.
• The role of political and institutional quality, specifically corruption and accounting standards, in attracting foreign capital.
• Financial market development and its correlation with investment inflows.
• The influence of human capital levels and financial openness on the strategic decisions of multinational enterprises.

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Summary of Chapters

1 Introduction: Provides an overview of the rising importance of cross-border M&As as a strategic tool for multinational enterprises and the resulting interest for policy makers in host countries.

2 Importance of inbound cross-border M&As: Defines relevant terminology and explores theoretical explanations and motives for cross-border M&A activity.

3 Analysis of country-specific determinants of inbound cross-border M&As: Examines specific macroeconomic, political, and institutional factors that potentially impact foreign investment decisions, supported by formulated hypotheses.

4 Econometric analysis: Describes the data, research model, and empirical results derived from the analysis of BRICS and other developing economies.

5 Conclusion: Summarizes the findings regarding country-specific determinants and offers policy implications based on the study's empirical results.

Keywords

Cross-border M&As, BRICS, Foreign Direct Investment, Market-seeking motives, Efficiency-seeking motives, Governance quality, Accounting standards, Human capital, Financial openness, Economic growth, Transaction costs, Institutional economics, Econometric analysis, Multinational enterprises, Market potential.

Frequently Asked Questions

What is the primary focus of this thesis?

The thesis examines the country-specific factors that determine the volume of inbound cross-border mergers and acquisitions (M&As) specifically in developing economies.

Which countries serve as the primary focus for the empirical analysis?

The empirical investigation is centered on the BRICS countries (Brazil, Russian Federation, India, China, and South Africa) for the period 1990-2018.

What is the primary research question?

The study seeks to identify which country-specific determinants influence the volume of inbound cross-border M&As and whether these factors differ in their impact on developing economies.

Which scientific methodology is employed?

The author uses an econometric approach involving a random-effects Generalized Least Squares (GLS) regression model to analyze panel data from the BRICS nations.

What are the central themes discussed in the main part?

The work covers macroeconomic environment factors, political and institutional quality (such as corruption and accounting standards), financial market development, human capital, and host country openness.

How are the key results categorized?

Results are categorized into baseline regression findings for the BRICS countries and robust testing using an additional sample of MINT countries and Vietnam.

What role does the "Hubris-assumption" play in the theoretical framework?

It attributes M&A activity to the overconfidence of management, leading to the misinterpretation of synergy potentials and potentially higher failure rates in transactions.

Does the level of corruption significantly impact M&A volumes?

Yes, the results indicate a significant positive correlation between improved governance quality (a reduction in corruption) and the volume of inbound transactions.

Why are accounting standards considered a potential determinant?

They are analyzed because the convergence with IFRS is assumed to reduce information costs and improve transparency, thereby making a market more attractive to foreign investors.