The role of earnout financing on the valuation effects of global diversification

• 成果类型: Article
• 署名作者: Barbopoulos, Leonidas G.; Danbolt, Jo; Alexakis, Dimitris
• 署名单位: University of Glasgow; University of Edinburgh; University of Edinburgh
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/s41267-017-0142-4
• 发表日期: 2018
• 页码: 523-551
• 关键词: cross-border acquisitions (CBAs); first-time CBAs (FTCBAs); multinational corporations (MNCs) and enterprises (MNEs); contingent earnouts; event study

摘要

This article examines the impact of earnout financing on the value of acquiring firms engaged in cross-border acquisitions (CBAs), using a dataset of UK, US, Canadian and Australian firms from 1992 to 2012. The results show that firms initiating international business operations via earnout-financed CBAs enhance their value more than acquirers in (a) domestic acquisitions and (b) remaining CBAs by established multinational corporations (MNCs). Our findings demonstrate the superiority of earnout financing in CBAs announced by acquirers that have no prior international business experience. The results are robust to the firms' endogenous choice to diversify globally and to the use of earnout financing. We contend that earnouts contribute to the reduction of valuation risk faced by firms acquiring a foreign target firm for the first time. Our empirical findings contribute to the existing debate on the merit of international expansion through CBAs and the role of earnout contingent payment.