Cross Border Mergers and Acquisition between Developed and Developing Nations: US And Mexico

Abstract

Mergers and acquisitions have become one of the most used tools by companies and investors to attempt to increase shareholder value. Among the literature, there is a significant gap in the analysis of cross-border mergers and acquisitions, particularly involving those deals that have a firm from a developing country. Using an event-study methodology, this paper studies the cross-border mergers and acquisitions between firms in the United States and Mexico to determine the short-term effects on shareholder value, as well as analyze the returns relationship to deal characteristics and firm attributes as studied in the literature. The empirical work presented in this paper suggests that US firms and Mexican firms realize abnormal positive gains when a merger or acquisition is announced. This positive effect happens regardless of whether the firm is being acquired or are the acquirors. US firms experience a statistically significant rise in abnormal returns when they are being acquired by a Mexican firm.