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Impact of institutional reforms and industry structural factors on market returns of emerging market rivals during acquisitions by foreign firms

Research paper by B. Elango, Karthik Dhandapani; Claudio Giachetti

Indexed on: 04 Jun '18Published on: 01 Jun '18Published in: International Business Review



Abstract

Publication date: Available online 11 April 2018 Source:International Business Review Author(s): B. Elango, Karthik Dhandapani, Claudio Giachetti This paper seeks to understand the joint impact of institutional reforms and industry structural factors on market returns earned by rivals in an emerging market during foreign acquisitions. We use a sample of 238 foreign acquisitions in India during the period 2004–2013 and find empirical evidence to support the notion that institutional reforms, foreign competition and business group competition positively impact the market returns of the rivals of acquired firms. Additionally, we find that the effects of foreign competition and business group competition on rivals’ market returns are shaped by the degree of institutional reforms in the industry, indicating that firms’ market returns in emerging markets during foreign acquisitions can be better understood through the incorporation of the joint role of industry structural factors and institutional reforms.