The Role of Currencies in M&A

Abstract

This thesis examines how currency fluctuations affect cross-border mergers and acquisitions (M&A), focusing on the differences between emerging and developed economies. We analyze a dataset comprising 124,381 M&A deals, which includes 23,458 cross-border transactions, across 36 countries from 1999 to the second quarter of 2024.

We study how currency appreciation, depreciation, and volatility influence international investment decisions. We find that currency appreciation in the target country significantly increases cross-border M&A activity. This suggests that a stronger currency indicates robust economic conditions, making the country more attractive to foreign investors. In contrast, higher currency volatility negatively impacts cross-border M&A, deterring investments, as it can be perceived as an increase in risk and uncertainty.

We demonstrate that emerging markets are more sensitive to currency movements than developed markets. We argue that this sensitivity is due to the greater instability in emerging economies.