Publicação
Valuation impact of currency depreciations on cross-border mergers and acquisitions: evidence from the Eurozone, UK and USA
| Resumo: | In this study I analyze the impact of currency shocks on the Cumulative Abnormal Returns (CAR) resulted from cross-border Mergers and Acquisitions (M&As) around the announcement day. Cross-border M&As represent almost one third of the deals. As there is not much information about it, this makes this analysis relevant. Furthermore, the scarce of information increases when we talk the ways that currency movements affect this kind of deals. Throughout this study, I analyze three different samples, with acquirers from Eurozone, United Kingdom and United States of America, each of them in relation to the rest of the world to see how the CARs are affected by currency shocks, which might or not, create incentives to pursue cross-border deals under depreciation effects. I believe that companies only would follow a cross-border deal under depreciation shocks, only if, they believe that those currency changes are temporary. They must be aware that a depreciation in the target’s currency decreases the cost of the deal, but it also reduces the revenues when converted to the local currency. To make this analysis, I rely on three clean samples with 1204 deals for the Eurozone sample, 763 deals for the UK sample and 2126 for the US sample, all the deals occur between 2009 and 2018. Attending the main target’s currencies, I find that Brazilian real and Australian dollar are currencies that depreciate more frequently in relation to Euro and the US dollar. On the UK side, the currencies that depreciate more frequently in relation to the pound are the Australian and the Canadian dollar. Despite I do not find many significant variables related to currency depreciations, the ones that I find when isolated from other variables reveal positive effects on the CARs. In the hypothesis 1a) and 1b) the Eurozone sample reveals a positive impact of 1.84 percentage points for the CAR(-2,+2) and 0.677 percentage points for the CAR(-1,+1), respectively, when the deal occurs 4 quarters after a currency shock. Moving to hypothesis 2b) the UK sample reveals a positive impact of 4.23,4.57 and 5.35 percentage points for CAR(-1,+1), CAR(-2,+2) and CAR(-5,+5), when there were at least 2 currency shocks in 4 quarters before the deal. |
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| Autores principais: | Meneses, Diogo Emanuel Queirós |
| Assunto: | Cross-border M&As Cumulative abnormal returns Currency shocks Fusões e aquisições internacionais CARS Desvalorização da moeda |
| Ano: | 2019 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | In this study I analyze the impact of currency shocks on the Cumulative Abnormal Returns (CAR) resulted from cross-border Mergers and Acquisitions (M&As) around the announcement day. Cross-border M&As represent almost one third of the deals. As there is not much information about it, this makes this analysis relevant. Furthermore, the scarce of information increases when we talk the ways that currency movements affect this kind of deals. Throughout this study, I analyze three different samples, with acquirers from Eurozone, United Kingdom and United States of America, each of them in relation to the rest of the world to see how the CARs are affected by currency shocks, which might or not, create incentives to pursue cross-border deals under depreciation effects. I believe that companies only would follow a cross-border deal under depreciation shocks, only if, they believe that those currency changes are temporary. They must be aware that a depreciation in the target’s currency decreases the cost of the deal, but it also reduces the revenues when converted to the local currency. To make this analysis, I rely on three clean samples with 1204 deals for the Eurozone sample, 763 deals for the UK sample and 2126 for the US sample, all the deals occur between 2009 and 2018. Attending the main target’s currencies, I find that Brazilian real and Australian dollar are currencies that depreciate more frequently in relation to Euro and the US dollar. On the UK side, the currencies that depreciate more frequently in relation to the pound are the Australian and the Canadian dollar. Despite I do not find many significant variables related to currency depreciations, the ones that I find when isolated from other variables reveal positive effects on the CARs. In the hypothesis 1a) and 1b) the Eurozone sample reveals a positive impact of 1.84 percentage points for the CAR(-2,+2) and 0.677 percentage points for the CAR(-1,+1), respectively, when the deal occurs 4 quarters after a currency shock. Moving to hypothesis 2b) the UK sample reveals a positive impact of 4.23,4.57 and 5.35 percentage points for CAR(-1,+1), CAR(-2,+2) and CAR(-5,+5), when there were at least 2 currency shocks in 4 quarters before the deal. |
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