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Management International Review

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01.04.2015 | Research Article

What Drives Overseas Acquisitions by Indian Firms? A Behavioral Risk-Taking Perspective

verfasst von: Raveendra Chittoor, Preet S. Aulakh, Sougata Ray

Erschienen in: Management International Review | Ausgabe 2/2015

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Abstract

Overseas acquisitions as a mode of international expansion entail a high level of risk, especially for firms from emerging economies which face considerable liabilities of foreignness and newness in international markets. Building on the behavioral risk-taking perspective, we examine the role of ownership characteristics on the propensity of Indian firms to make foreign acquisitions. Empirical results from a sample of BSE 500 Indian firms during the 2002–2011 period show that after controlling for firm level resources and capabilities identified in the prior literature, international experience of firm CEOs, promoter shareholding, and ownership share of foreign institutional investors positively influence firms’ acquisition propensities in foreign markets. Furthermore, our results show that the effects of these determinants on overseas acquisitions are stronger for stand-alone independent firms than for those affiliated to business groups.

Vorheriger Artikel International Diversification of Emerging Market Firms: The Role of Ownership Structure and Group Affiliation

Nächster Artikel Reverse Knowledge Transfer from Overseas Acquisitions: A Survey of Indian MNEs

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Some examples of high profile acquisitions include Hindalco, an Indian company owned by the Aditya Birla group, acquiring Novelis for US$ 6.0 billion to emerge as the world’s largest manufacturer of rolled aluminum products and the fifth-largest integrated aluminum maker in the world (The Times of India 2007), the acquisition by Tata Steel, of the Anglo-Dutch major Corus for about US$ 12 billion to jump from 56th to 5th largest steel company in the world in 2007 and the acquisition of the iconic Jaguar and Land Rover by Tata Motors for US$ 2.3 billion (The Financial Express 2008).

According to the Securities Exchange Board of India (SEBI), a promoter is defined as any person or persons who are directly or indirectly in control of the company.

This data collection, which took about 6 months, was carried out with the help of a research associate and cross-verified by one of the authors.

As the companies are not expected to make overseas acquisitions every year, we were interested in the determinants a company making a cross-border acquisition at least once during our study period. About 34 % of our sample firms made an overseas acquisition at least once during the study period.

According to the Securities Exchange Board of India (SEBI), a promoter is defined as any person or persons who are directly or indirectly in control of the company.

We preferred probit over logit models based on the curve fit with the data. Results were similar in both the cases.

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Titel: What Drives Overseas Acquisitions by Indian Firms? A Behavioral Risk-Taking Perspective
verfasst von: Raveendra Chittoor
Preet S. Aulakh
Sougata Ray
Publikationsdatum: 01.04.2015
Verlag: Springer Berlin Heidelberg
Erschienen in: Management International Review / Ausgabe 2/2015
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-015-0238-7

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