n African Review of Economics and Finance - Working capital and mergers and acquisitions transactions by emerging market acquirers

Volume 11 Number 2
  • ISSN : 2042-1478
  • E-ISSN: 2410-4906


This study investigates whether working capital positions of emerging market acquirers drive mergers and acquisitions (M&As) transactions they execute and further explore if it influences these acquirers' decisions on the type of merger deals they pursue. We use a cross-section of 160 listed firms from ten (10) emerging market countries over the period of 2004 to 2013 and employ the probit regression technique to explore the likelihood of working capital of these firms to motivate to undertake M&A deals. The results suggest that working capital positions of emerging market acquirers are less likely to drive them to undertake acquisition deals. However, the study reveals the marginal effect coefficient for the firms’ total assets to be positive and statistically significant at 1%, suggesting that the firms’ level of total assets rather is more likely to influence them to execute acquisition transactions, all other things being equal. There is no evidence of the firms’ level of financial leverage, ROAs and Tobin’s Q having the possibility of influencing the acquirers to pursue M&As. Finally, regarding whether working capital again influences the type of M&As these firms execute, the results indicate that it is less likely to encourage these acquirers to pursue either horizontal or vertical type of merger.

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