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Korean Journal of Financial Studies 2016;45(3):507-529.
Published online June 30, 2016.
What Causes the Size Effect and the Diversification Effect in the Global M&A Transactions?
Byoung-jin Kim, Jin-young Jung
국제간 합병의 규모효과와 다각화디스카운트
김병진, 정진영
Abstract
This study analyzes the market performance of acquiring firms in the 169 global M&A transactions, occurred between 2001 and 2010, in the Korean stock market. We find that the size effect and the diversification discount are robust over the Korean firms’ global M&As in the same way as domestic mergers. Besides, the size effect of global M&As can be explained by an acquirer’s cash generation ability and profitability, implying that the small acquirers with high EBITDA/sales are not preferred to transfer their wealth to the target foreign companies because the global M&A transactions are risky under the circumstances of high information asymmetry. We also find that the acquirers with a higher return on equity (ROE) earn the higher returns when they diversify globally even though there exist on average diversification discount effects, which shows ROE can be the motive power to recover the diversification discount. The study presents new evidence that the size effect and the diversification discount in the global M&As, until now a puzzle, can be explained by EBITDA/sales and ROE, thereby offering a new perspective on the global M&A research.
Key Words: 국제간 합병,규모효과,다각화디스카운트,다각화효과,합병의 공시효과,Diversification Discount,Diversification Effect,Global M&, As,Return on Equity,Size Effect


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