Rao-Nicholson, Rekha and Salaber, Julie 2016. Euphoria in financial markets: how Indian companies generate value in their cross-border acquisitions. Research in International Business and Finance. 38, pp. 494-508. https://doi.org/10.1016/j.ribaf.2016.07.022
| Title | Euphoria in financial markets: how Indian companies generate value in their cross-border acquisitions |
|---|---|
| Type | Journal article |
| Authors | Rao-Nicholson, Rekha and Salaber, Julie |
| Abstract | In this paper, we investigate the effect of euphoria on returns derived by Indian companies in their cross-border acquisitions. Cognitive legitimacy generated at the country level facilitated firms in deriving higher value from internationalization. In addition, overoptimism after the legitimacy-building event led to euphoria in financial markets and short-term abnormal returns. Hence we argue that the springboard effect created by legitimacy is short-lived, as euphoria fades away over time. Using cross-border and domestic acquisitions by Indian companies during 1999-2009, and controlling for fundamental factors, both financial and non-financial, we find support for our euphoria hypothesis. Because of overoptimism, Indian companies experienced short-term abnormal returns in their cross-border acquisitions in the few years following the legitimation process, but not in later years. |
| Keywords | Cognitive legitimacy, euphoria effect, India, cross-border acquisitions |
| Journal | Research in International Business and Finance |
| Journal citation | 38, pp. 494-508 |
| ISSN | 0275-5319 |
| Year | 2016 |
| Publisher | Elsevier |
| Accepted author manuscript | |
| Digital Object Identifier (DOI) | https://doi.org/10.1016/j.ribaf.2016.07.022 |
| Publication dates | |
| Published | 14 Jul 2016 |
| License | CC BY-NC-ND 4.0 |