PERFORMANCE EFFECTS OF CROSS-BORDER ACQUISITIONS ON ACQUİRERS AND THEIR SİSTER AFFILIATES IN THE BUSINESS GROUP


Kalkan N.

STR Paper Development Workshop (PDW) for Turkey, 2021, İstanbul, Turkey, 25 - 26 June 2021

  • Publication Type: Conference Paper / Unpublished
  • City: İstanbul
  • Country: Turkey

Abstract

The purpose of the study is to examine the performance difference after cross-border acquisitions made by Turkish business group affiliated firms throughout their lives. Thirty-six investments were gone through for the acquirer firms and their sister affiliate firms in six business groups with an event study approach. Return on assets, return on equity, net profit margin, gross profit margin, the ratio of price to earnings, and the ratio of market value to book value are used to observe profitability and market performance. All analyses applied for seven years, matching three years before and after the event one by one. To examine the differences in each serial, Paired Group T-Test was applied. But, when the series does not have a normal distribution, data analyzed with the Wilcoxon Signed Ranks Test, the non-parametric alternative of the Paired Group T-Test. Results of 288 observations show that acquisitions made by Turkish business groups affect neither acquirer nor sister affiliates positively. The similarly significant findings in the event windows of the acquirer firm and sister affiliates show that a cross-border acquisition can affect other sister companies affiliated to the holding as much as the acquirer. Details of the research design are as follows.

It is easier for developing countries or countries not produce strategically important technological knowledge at home to obtain this information externally through cross-border acquisitions. The maturity of the institutions of the developing countries is behind when compared to the developed economies. This underdevelopment of knowledge production causes a costly, risky, and time-consuming structure for companies from these countries. The tendency to seek and find technological knowledge externally arrives as a tool to eliminate the existing constraint. Multinational companies from developing countries turn towards cross-border acquisitions to obtain strategic knowledge, especially from developed countries. They also intend to improve their technological and innovative skills by using acquired knowledge in the local market (Buckley, Munjal, Enderwick, & Forsans, 2016; Deng, 2009; Fu, Sun, & Ghauri, 2018; Liu, Ghauri, & Sinkovics, 2010; Luo & Tung, 2007; Meyer, Wright, & Pruthi, 2009; Rui & Yip, 2008; Wang, Senaratne, & Rafiq, 2015).

Many studies in the field show that cross-border acquisitions, together with other investment types, are made for being successful (Alhanhanah et al., 2019; Gaffney, Kedia, & Clampit, 2013; Kedia, Gaffney, & Clampit, 2012). Including growth strategy and synergy (Aureli, Ciambotti, & Dragoni, 2016; Brush, 2016; İlhan, 2017), developing new products or processes (Carvalho & Ogasavara, 2016; Chen & Liu, 2015; Jayanthi, Sivakumar, & Haldar, 2016; Pradhan, 2008; Thanos & Papadakis, 2012) are some other specific reasons for making cross-border acquisitions. The research questions arise from the point that if any of the acquisitions are made not for only the purpose of making an acquisition, and if a cross-border investment is riskier than domestic investments, does it worth making a cross-border acquisition? Furthermore, seeing acquisitions as knowledge hubs and assumpting knowledge sharing and transferring, do business group sister affiliates’ performances arise after cross border acquisitions?

In the Turkish context, cross-border acquisition as a phenomenon is an understudied issue. Many studies investigate inward acquisitions (Akdoğu, 2012; Genc & Kalkan, 2019; Geyikdaǧi & Karaman, 2013; Yildirim, 2017) or acquisitions between Turkish firms (Alhanhanah, Akbalik, & Akosile, 2019; Genç & Kalkan, 2020). But there is no comprehensive study that focuses on outward acquisitions and their performance effects on the acquirer or sister affiliates. In a context where the business groups are under a family’s control in formal and informal ties (Karaevli & Yurtoglu, 2018), studying the performance effects of acquisitions on sister affiliates will contribute to the literature.

Keywords: Cross-border acquisitions, business groups, sister affiliate, firm performance, EMNEs.