UNDERSTANDING DETERMINANTS OF DOMESTIC MERGERS AND ACQUISITIONS THROUGH LITERATURE REVIEW
Abstract
For a firm entering into M & A is sometimes a choice and other times it is a compulsion. But if a Corporate wants to grow, it has to undergo organic as well as inorganic growth in form of M & A. The study of determinants of Mergers and Acquisitions has thereby become of utmost importance and relevant in times of intense competition among Firms. The current study explores the determinants of mergers and acquisitions for Domestic deals in India in comparison to other nations. The determinants can be categorized into firm-specific, macro-economic, strategic determinants, financial determinants. Thorough research is done by following a rigorous process from exploring the papers to synthesizing the research. The study also gives insights regarding how the relevance of factors determining mergers and acquisitions is changing in India with an impact of COVID-19 and other global level uncertainties.
JEL Classification Codes: F23, F65, G34, L25.
References
Ali-Yrkko, J. (2002). Mergers and acquisitions – reasons and results, Discussion Papers No 792, Etla – The Research Institute of the Finnish Economy, Helsinki.
Agrawal, M., & Sensarma, R. (2007). Determinants of merger activity: evidence from India. International Journal of Financial Services Management, 2(4), 277-288.
Arens, P., & Brouthers, K. D. (2001). Key stakeholder theory and state owned versus privatized firms. MIR: Management International Review, 377-394.
Athreye, S., & Kapur, S. (2009). Introduction: The internationalization of Chinese and Indian firms trends, motivations and strategy. Industrial and Corporate Change, 18(2), 209–221.
Balasubramanyam, V. N., & Forsans, N. (2010). Internationalisation drivers of Indian firms. Asian Business & Management, 9(3), 319-340.
Baniak, A., Cukrowksi, J., & Herczyn˜ski, J. (2003). On the determinants of foreign direct investment in transition economics. Problems of Economic Transition, 48(2), 6–28
Barkema, H.G., & Vermeulen, F. (1998). International expansion through start-up or acquisition: a learning perspective. Academy of Management Journal, 41(1), 7-26.
Basant, R. (2000). Corporate Response to Economic Reforms. Economic and Political Weekly, 35(10), 813-822.
Basant, R., & Mishra, P. (2016). Trends in strategies and performance of the Indian corporate sector: What has changed in two decades of economic reforms (IIMA Working Paper No. 2016-03-31). Ahmedabad: Indian Institute of Management.
Beena, P. (2004). Towards understanding the merger wave in the Indian corporate sector: A comparative perspective (Working Paper). Centre for Developmental Studies.
Beena, P. L. (2008). Trends and perspectives on corporate mergers in contemporary India. Economic and Political Weekly, 48-56.
Berkovich, E., & Narayan, M.P. (1993). Motives for takeover: an empirical investigation, Journal of Financial and Quantitative Analysis, 28(3), 347-362.
Bertrand, O., Mucchielli, J. L., & Zitouna, H. (2007). Location choices of multinational firms: The case of mergers and acquisitions. Journal of Economic Integration, 22(1), 181–209.
Bhagat, R. S., Kedia, B. L., Harveston, P. D., & Triandis, H. C. (2002). Cultural variations in the cross-border transfer of organizational knowledge: An integrative framework. Academy of management review, 27(2), 204-221.
Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58, 142-168.
Barakat, F. S., Perez, M. V. L., Ariza, L. R., Barghouthi, O. A., & Islam, K. M. A. (2020). The Impact Corporate Governance on Internet Financial Reporting: Empirical Evidence from Palestine. International Journal of Accounting & Finance Review, 5(4), 1-22.
Bhargavi J., S.N.V. Sivakumar and A. Haldar, 2016, Cross-border Acquisitions and Host Country Determinants: Evidence From Indian Pharmaceutical Companies, Sage Publishers, 17, 3,684-99.
Bhattacharyya, S. S. (2019). Mergers and Acquisition by Indian Firms: Managerial Perspectives on Challenges and Solutions. In Dynamic Perspectives on Globalization and Sustainable Business in Asia (pp. 41-55). IGI Global.
Boateng, A., Qian, W., & Tianle, Y. (2008). Cross‐border M&As by Chinese firms: An analysis of strategic motives and performance. Thunderbird international business review, 50(4), 259-270.
Bradley, M., Desai, A., & Kim, E. H. (1988). Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms. Journal of financial Economics, 21(1), 3-40.
Brealey, R. A., & Myers, S. C. (2003). Principles of corporate finance (McGraw-Hill higher education, New York, NY).
Bris, A., Brisley, N., & Cabolis, C. (2008). Adopting better corporate governance: Evidence from cross-border mergers. Journal of Corporate Finance, 14(3), 224–240.
Bris, A., & Cabolis, C. (2008). The value of investor protection: Firm evidence from cross-border mergers. Review of Financial Studies, 21(2), 605–648.
Brooks D., Jongwanich, J. (2011) Cross-border mergers and acquisitions and financial development: evidence from emerging Asia. ADB economics working paper series (249), Manila, Philippines, February
Buckley, P. J., Devinney, T. M., & Louviere, J. J. (2007). Do managers behave the way theory suggests? A choice-theoretic examination of foreign direct investment location decision-making. Journal of international business studies, 38(7), 1069-1094.
Byun, H. S., Lee, H. H., & Park, C. Y. (2013). Assessing External and Internal Factors Influencing Foreign Direct Investment in Emerging Countries: A Comparison between Mergers and Acquisitions and Greenfield Investment. Journal of Korea Trade, 655-676.
Capron, L., & Shen, J. C. (2007). Acquisitions of private vs. public firms: Private information, target selection, and acquirer returns. Strategic management journal, 28(9), 891-911.
Cartwright, S., & Cooper, C.L. (1995). Organizational marriage: “hard” versus “soft” issues?’. Personnel Review, 24(3), 32‒42.
Cartwright, S. (1998). International mergers and acquisitions: the issues and challenges. In Gersten, M.C., Søderberg, A-M. and Torp, J.E. (eds), Cultural Dimensions of International Mergers and Acquisitions. New York: Walter de Gruyter.
Caves, R. (1996). Multinational enterprise and economic analysis, 2nd ed. New York: Cambridge University Press
Chakrabarti, A. (2001). The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions. Kyklos, 54(1), 89-114.
Chatterjee, S. (2007). Why is synergy so difficult in mergers of related business? Strategy and Leadership, 35(2).
Chen, C., & Findlay, C. (2002). A Review of Cross-Border Mergers and Acquisitions in APEC, Canberra: The Australian National University. mimeo.
Chittoor, R. (2009). Internationalization of emerging economy firms-need for new theorizing. Indian Journal of Industrial Relations, 27-40.
Christensen, C.M., Alton, R., Rising, C. & Waldeck, A. (2011). The Big Idea: The New M&A Playbook. Harvard Business Review. Retrieved from: https://hbr.org/2011/03/the-big-idea- the-new-ma-playbook
Contractor, F. J., Lahiri, S., Elango, B., & Kundu, S. K. (2014). Institutional, cultural and industry related determinants of ownership choices in emerging market FDI acquisitions. International Business Review, 23(5), 931-941.
Danzon, P.M., Epstein, A., & Nicholson, S. (2004). Mergers and acquisitions in the pharmaceutical and biotech industries. NBER Working Paper N. 10536.
Danzon, P.M., Epstein, A., & Nicholson, S. (2007). Mergers and acquisitions in the pharmaceutical and biotech industries, Managerial and Decision Economics, 28(4/5), 307-328.
Das, A., & Kapil, S. (2011). Analysis of cross-border and domestic M&A deals in technology sector in India and China. Transnational Corporations Review, 3(2), 148-163.
Das, A., & Kapil, S. (2015). Inorganic growth of technology sector firms in emerging markets. International Journal of Emerging Markets.
Denyer, D., & Tranfield, D. (2006). Using qualitative research synthesis to build an actionable knowledge base. Management Decision, 44(2), 213–227.
Dermine J. (2003). Banking in Europe: past, present and future, The Transformation of the European Financial System, pp. 31-95.
De Santis, R. A., Anderton, R., & Hijzen, A. (2004). On the determinants of Euro area FDI to the United States: The knowledge-capital-Tobin's Q framework (ECB Working Paper Series 329). Frankfurt: The European Central Bank.
Dhingra, K. (2019). An analysis of Mergers and Acquisitions in Indian Pharmaceutical Industry. Amity Global Business Review, 72.
Dhingra, K. & Kapil, S. (2019). Determinants of Mergers and Acquisitions, A Tool in Vuca in Business: A Review Study. International Journal of Advanced Science and Technology, 28(19), 321 - 330.
Dhingra, K. & Kapil, S. (2020). Mergers & Acquisitions in Pharmaceutical Industry, A Challenge in Vuca World. Test Engineering & Management, 82, 5819-5831
Dunning, J. H. (1993). Multinational Enterprises and the Global Economy. Wokingham: Addison Wesley.
Dunning, J. H., & Lundan, S. M. (2008). Institutions and the OLI paradigm of the multinational enterprise. Asia Pacific Journal of Management, 25(4), 573-593.
Dunning, J. H. (2009). Location and the multinational enterprise: Retrospective thoughts. Journal of International Business Studies, 40(1), 20–34.
Dunning, J. (2013). Multinationals, technology & competitiveness (RLE international business). Routledge.
Duppati, G. R., & Rao, N. V. (2015). Cross-border mergers and acquisitions: Mature markets vs. emerging markets—with special reference to the USA and India. Cogent Business & Management, 2(1).
Di Giovanni, J. (2002). What drives capital flows? The case of cross-border M&A activity and financial deepening.
Erdogan, A.I. (2012). The determinants of mergers and acquisitions: evidence from Turkey, International Journal of Economics and Finance, 4(4).
Erel, I., Liao, R. C., & Weisbach, M. S. (2012). Determinants of cross‐border mergers and acquisitions, Journal of Finance, 67(3), 1045-1082.
Evans, J., Treadgold, A., & Mavondo, F. T. (2000). Psychic distance and the performance of Iinternational retailers–a suggested theoretical framework. International marketing review.
Fortanier, F., & van Tulder, R. (2009) Internationalization trajectories—a cross- country comparison: are large Chinese and Indian companies different? Industrial and Corporate Change, 18(2), 223-247.
Galpin, T. J. (2021). As another M&A wave begins: three keys to success. Strategy & Leadership.
Geppert, M., Dörrenbächer, C., Gammelgaard, J., & Taplin, I. (2013). Managerial risk‐taking in international acquisitions in the brewery industry: institutional and ownership influences compared. British Journal of Management, 24(3), 316-332.
Gubbi, S. R., Aulakh, P. S., Ray, S., Sarkar, M. B., & Chittoor, R. (2010). Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms. Journal of International Business Studies, 41(3), 397-418.
Gantumur, T., & Stephan, A. (2007). Mergers & acquisitions and innovation performance in the telecommunications equipment industry. Electronic Working Paper Series, CESIS, No. 111.
Gastanaga, M. V., Nugent, J. B., & Pashamova, B. (1998). Host country reforms and FDI inflows: How much difference do they make? World Development, 26(7), 1299–1314.
George, G., Corbishley, C., Khayesi, J. N. O., Haas, M. R., & Tihanyi, L. (2016). Bringing Africa in: Promising directions for management research. Academy of Management Journal, 59(2), 377–393.
Golbe, D.L. and White, L.J. (1988), A time-series analysis of mergers and acquisitions in the US economy, in Auerbach, A.J. (Ed.), Mergers and Acquisitions, University of Chicago Press, Chicago, IL.
Haleblian, J., McNamara, G., Kolev, K., & Dykes, B. J. (2012). Exploring firm characteristics that differentiate leaders from followers in industry merger waves: A competitive dynamics perspective. Strategic Management Journal, 33(9), 1037-1052.
Harford, J. (1999). Corporate cash reserves and acquisitions. The Journal of Finance, 54(6), 1969-1997.
Harford, J. (2005). What drives merger waves? Journal of Financial Economics, 77(3), 529-560.
Hitt, M., Hoskisson, R., Johnson, R., & Moesel, D. (1996). The market for corporate control and firm innovation. Academy of Management Journal, 39, 1084–1119.
Hitt, M. A., King, D., Krishnan, H., Makri, M., Schijven, M., Shimizu, K., & Zhu, H. (2009). Mergers and acquisitions: Overcoming pitfalls, building synergy, and creating value. Business Horizons.
Hitt, M. A., King, D. R., Krishnan, H., Makri, M., Schijven, M., Shimizu, K., & Zhu, H. (2012). Creating value through mergers and acquisitions: Challenges and opportunities.
Ilmakunnas, P., & Topi, J. (1999). Microeconomic and macroeconomic influences on entry and exit of firms. Review of Industrial Organization, 15(3), 283-301.
Jayadev, M., & Sensarma, R. (2007). Mergers in Indian banking: An analysis. South Asian Journal of Management, 14(4), 20–49.
Johanson, J. & Vahlne, J-E. 1977. The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(Spring/Summer), 23‒32.
Jovanovic, B., & Rousseau, P. L. (2002). The Q-theory of mergers. American Economic Review, 92(2), 198-204.
Laamanen, T. (2007). On the role of acquisition premium in acquisition research. Strategic Management Journal, 28(13), 1359-1369.
Kaartemo, V. (2007). The Motives of Chinese Foreign Investments in the Baltic Sea Region. PEI Electronic Publications, No. 7/2007, Pan-European Institute.
Kamaly, A. (2007). Trends and determinants of mergers and acquisitions in developing countries in 1990. International Research Journal of Finance and Economics, 8, 16L 30.
Kang, J. K. (1993). The international market for corporate control: Mergers and acquisitions of US firms by Japanese firms. Journal of financial economics, 34(3), 345-371.
Kang, Nam-Hoon, and Sara Johansson. (2000). Cross-Border Mergers and Acquisitions.” OECD Science, Technology and Industry Working Papers. Paris: Organisation for Economic Co-operation and Development. Retrieved from http://www.oecdilibrary.org/content/workingpaper/137157251088
Khanna, T., & Rivkin, J. W. (2001). Estimating the performance effects of business groups in emerging markets. Strategic management journal, 22(1), 45-74.
Koerniadi, H., Krishnamurti, C., & Tourani-Rad, A. (2015). Cross-border mergers and acquisitions and default risk. International Review of Financial Analysis, 42, 336-348.
Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of international business studies, 19(3), 411-432.
Kravis, I. B. & Lipsey, R. E. (1982). The Location of Overseas Production and Production for Ex-port by U. S. Multinational Firms. Journal of International Economics, 12, 201–222.
Kumar, Nagesh (2000). Multinational Enterprises and M&As in India: Patterns and Implications, RIS Discussion Paper No: 5.
Kumar, N. (2009). How emerging giants are rewriting the rules of M&A. Harvard Business Review, 87 (5), 115–121.
Lall, S. (2002). Linking FDI and Technology Development for Capacity Building and Strategic Competitiveness. Transnational Corporations, 11.
Leamer, E. E., & Storper, M. (2014). The economic geography of the internet age. In Location of international business activities (pp. 63-93). Palgrave Macmillan, London.
Letto-Gilles, G., Meschi, M., & Simonetti, R. (2001). Cross-border mergers and acquisitions: Patterns in the EU and effects. London: South Bank University, mimeo.
Liang, Z., Jamal, A., Malik, A., Dadwal, S., & Haq, A. (2016). Determinants of Inter Country Investments Through Merger and Acquisition in Emerging Asian Markets. Pakistan Journal of Social Sciences (PJSS), 36(2).
Madhok, A. & Keyhani, M. (2012). Acquisition as Entrepreneurship: Asymmetries, opportunities, and the internationalization of multinational from emerging economies, Global Strategy Journal, 2, 26-42.
Markides, C. C., & Ittner, C. D. (1994). Shareholder benefits from corporate international diversification: Evidence from US international acquisitions. Journal of international business studies, 25(2), 343-366.
Mata, J., & Portugal, P. (2000). Closure and divestiture by foreign entrants: The impact of entry and post-entry strategies. Strategic Management Journal, 21(5), 549–562.
Mata, J., & Portugal, P. (2004). Patterns of entry, post-entry growth and survival: a comparison between domestic and foreign owned firms. Small Business Economics, 22(3), 283-298.
Mathews, J. A. (2017). Dragon multinationals powered by linkage, leverage and learning: A review and development. Asia Pacific Journal of Management, 34(4), 769-775.
Maquieira, C. P., Megginson, W. L., & Nail, L. (1998). Wealth creation versus wealth redistributions in pure stock-for-stock mergers. Journal of Financial Economics 48, 3–33.
Mitchell, M. L., & Mulherin, J. H. (1996). The impact of industry shocks on takeover and restructuring activity. Journal of financial economics, 41(2), 193-229.
Moon, H. C., & Roehl, T. W. (2001). Unconventional foreign direct investment and the imbalance theory. International business review, 10(2), 197-215.
Murtha, T. P., & Lenway, S. A. (1994). Country capabilities and the strategic state: How national political institutions affect multinational corporations' strategies. Strategic management journal, 15(S2), 113-129.
Nayyar, D. (2008). The internationalization of firms from India: Investment, mergers and acquisitions. Oxford Development Studies, 36(1), 111-131.
Nenova, T. (2003). The value of corporate voting rights and control: A cross-country analysis. Journal of financial economics, 68(3), 325-351.
Nguyen, P., Zaied, Y. B., & Pham, T. P. (2019). Does idiosyncratic risk matter? Evidence from mergers and acquisitions. The Journal of Risk Finance.
Nguyen, G., & Vu, L. (2021). Does venture capital syndication affect mergers and acquisitions?. Journal of Corporate Finance, 67, 101851.
Nkongolo-Bakenda, J. M., Anderson, R., Ito, J., & Garven, G. (2010). Structural and competitive determinants of globally oriented small-and medium-sized enterprises: An empirical analysis. Journal of International Entrepreneurship, 8(1), 55-86.
Pandya, V., & Sisombat, S. (2017). Impacts of foreign direct investment on economic growth: empirical evidence from Australian economy. International Journal of Economics and Finance, 9(5), 121-131.
Pandya, V. U., Street, L., & Street, L. (2018). Mergers and Acquisitions Trends—The Indian Experience. International Journal of Business Administration, 9(1), 44-54.
Pradhan, J. P., & Sauvant, K. P. (2010). Introduction: The rise of Indian multinational enterprises: Revisiting key issues. In The rise of Indian multinationals (pp. 1-23). Palgrave Macmillan, New York.
Ramakrishnan, K. (2010). Redistribution of wealth on merger announcements in India. Management Research Review.
Rasiah, R., Kaur, K., & Kumar, A. (2010). Does firm size matter in export, technology, and marketing activities of Indian garment firms? Asian Journal of Technology Innovation, 18(1), 45–71.
Reynolds, N. S., & Teerikangas, S. (2016). The international experience in domestic mergers–Are purely domestic M&A a myth?. International Business Review, 25(1), 42-50.
Rhoades, S. A. (1998). The efficiency effects of bank mergers: An overview of case studies of nine mergers. Journal of Banking & Finance, 22(3), 273-291.
Rhodes‐Kropf, M., & Viswanathan, S. (2004). Market valuation and merger waves. The Journal of Finance, 59(6), 2685-2718.
Root, F. R. & Ahmed, A. A. (1979). Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries. Economic Development and Cultural Change, 27(4), 751-767.
Rose, A. K. (2000). One money, one market: Estimating the effect of common currencies on trade. Economic Policy, 15(30), 7–46.
Rossi, S., & Volpin, P. F. (2004). Cross-country determinants of mergers and acquisitions. Journal of Financial Economics, 74(2), 277-304.
Schneider, F. & Frey, B. (1985). Economic and Political Determinants of Foreign Direct Investment. World Development, 13(2), 161-175.
Seth, A. (1990), Sources of value creation in acquisitions: An empirical investigation. Strategic Management Journal, 11(6), 431-446.
Shimizu, K., Hitt, M. A., Vaidyanath, D., & Pisano, V. (2004). Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future. Journal of international management, 10(3), 307-353.
Simons, J. J., Williams, M. A., Shull, B., Wood, W. C., Kamerschen, D. R., Kohler, J., ... & Massey, P. Symposium on New 1992 Merger Guidelines (continued) David T.
Scheffman, Guest editor Recent Empirical Evidence on Mergers and Acquisitions 741 By Paul A. Pautler and Robert P. O'Quinn The Renaissance of Market Definition 799.
Srivastava, R. K. (2018). Merger, acquisition–right move or emotional move for growth–case study of sun pharmaceutical. International Journal of Pharmaceutical and Healthcare Marketing.
Stahl, G. K., & Voigt, A. (2008). Do cultural differences matter in mergers and acquisitions? A tentative model and examination. Organization science, 19(1), 160-176.
Stigler, G. (1968). The organization of industry (Richard D. Irwin, Homewood, IL).
Teerikangas, S., & Very, P. (2006). The culture–performance relationship in M&A: From yes/no to how. British journal of management, 17(S1), S31-S48.
Trautwein, F. (1990). Merger motives and merger prescriptions. Strategic Management Journal, 11(4), 283–295.
Vahlne, J. E., & Johanson, J. (2020). The Uppsala model: Networks and micro-foundations. Journal of International Business Studies, 51(1), 4-10.
Vaara, E., Sarala, R., Stahl, G. K., & Björkman, I. (2012). The impact of organizational and national cultural differences on social conflict and knowledge transfer in international acquisitions. Journal of Management Studies, 49(1), 1-27.
Vasilaki, A., & O'Regan, N. (2008). Enhancing post‐acquisition organisational performance: the role of the top management team. Team Performance Management: An International Journal.
Venkiteswaran, N. (1997). Restructuring of corporate India: The emerging scenario. Vikalpa, 22(3), 3-13.
Vyas, V., & Narayanan, K. (2016). Does M&A matter for R&D? Evidence from the pharmaceutical sector in India. In Technology (pp. 89-109). Springer, Singapore.
Welch, D., Welch, L., & Piekkari, R. (2005). Speaking in tongues: The importance of language in international management processes. International Studies of Management & Organization, 35(1), 10-27.
Wilson, J. (2003). Globalization and the limits of national merger control laws. Kluwer Law International BV.
Worthington, A.C. (2004). Determinants of merger and acquisition activity in Australian cooperative deposit-taking institutions, Journal of Business Research, 57(1), 47-57.
Yagil, J. (1996). Mergers and macro‐economic factors. Review of financial economics, 5(2), 181-190.
Copyright (c) 2021 Sheeba Kapil, Kanika Dhingra
This work is licensed under a Creative Commons Attribution 4.0 International License.
