Cross-border merger and acquisition activities in Asia: the role of macroeconomic factors

• Published in: Studies in economics and finance (Charlotte, N.C.) N.C.), 2018-06, Vol.35 (2), p.307-329
• Main Authors: Ibrahim, Yusnidah, Raji, Jimoh Olajide
• Format: Article
• Language: English
• Subjects: Acquisition; Acquisitions & mergers; Borders; Cross border transactions; Crude oil prices; Economic growth; Economic models; Foreign exchange rates; Foreign investment; GDP; Gross Domestic Product; Inflation; Influence; Interest rates; Investigations; Macroeconomics; Mergers; Money supply; Panel data; Policy making; Trends
• ISSN: 1086-7376; 1755-6791
• DOI: 10.1108/SEF-06-2017-0146

Purpose This paper aims to examine the influence of key macroeconomic factors on the inward and outward acquisition activities of six ASEAN (ASEAN: Association of Southeast Asian Nations) countries, namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, over the 1996-2015 period. Design/methodology/approach The study uses alternative panel data methods, including pooled mean group, mean group and dynamic fixed-effect estimators. Findings The results indicate that gross domestic product (GDP), interest rate, exchange rate, money supply and inflation rate are the most important macroeconomic factors explaining the trends of cross-border mergers and acquisition outflows of the ASEAN-6 countries. Specifically, GDP, money supply and inflation rate have significant positive relationships with acquisition outflows, while interest rate and exchange rate exert significant negative influence. On the other hand, the authors find four significant macroeconomic factors explaining the trends of the inward acquisitions. Essentially, GDP, money supply and inflation rate have significant positive impacts on inward acquisitions, while the impact of exchange rate is negatively significant. Research limitations/implications Unavailability of data limits this study to pool six sample countries from ASEAN, instead of ten representative member countries. Practical implications The results of this study can signal to firms or investors, involving in cross-border mergers and acquisitions, where to direct foreign resources flows. Moreover, having the knowledge about the relative levels of market size and other macroeconomic factors in both home and host countries can be of great importance for investment decision. Therefore, policymakers of ASEAN countries should make appropriate macroeconomic policies that can stimulate inward and outward acquisitions. Originality/value The main contribution of this paper is that it is the first to present the analysis of macroeconomic influences on the trends of inward and outward merger and acquisition activities in six ASEAN countries.