engleski

Determinates of Incoming Cross-border M&A: Evidence from European Transition Countries

This paper aims to determine variables which affect the value of cross-border M&A in transitional European countries when they are regarded as host countries. Dynamic panel models have been estimated using Arellano and Bond GMM estimator for period between year 1994 and 2008. Following host countries have been taken for the analysis of the value of cross-border M&As: Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Slovakia and Slovenia. Data have been obtained from UNCTAD data base named The Cross-border mergers and acquisitions database, from the Word Bank base named World Bank Indicator 2008 and The Worldwide Governance Indicators. According to the estimated parameters obtained from several models, the analysis of the observed countries shows that following variables are statistically significant and have positive effect on the value of cross-border M&A to GDP ratio: lagged value of cross-border M&A to GDP ratio, lagged GDP per capita, inflation, interest rate spread and control of corruption. Unlike political stability and absence of violence, rule of law and regulatory quality control of corruption is the only statistically significant aggregate governance indicator. Due to very high value of correlation between four mentioned variables only control of corruption has been included in regression. Obtained results suggest that the economic growth of the country is likely to attract cross-border mergers and acquisitions in European transitional countries as they become more capable to absorb investments. Yet, during crises such as the global recession, certain decline in investment activities in the form of cross-border M&As can be expected due to stagnation in their economies and in economies of developed countries, which are often investors in this area. However, growth of the value of cross-border M&A caused by negative business environment in the form of: (1) inflation and interest rate spread and (2) decrease of the value of three indicators of financial development may indicate that the companies in European transitional countries are sold to cross-border investors at relatively low prices (“fire-prices”).

cross-border mergers and acquisitions; European transitional countries; dynamic panel models

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