Seleyna

Introduction#

Main RQ: Influence of Brexit $\Rightarrow$ Cross-border M&A? (UK and EU)

This has, of course, detrimental impact on the country-level barriers to cross-border mergers and acquisitions.

This sentence is a conclusion that should follow an argument. I think you should state it somewhat later in your thesis, after you have provided an overview of all new regulations pertaining to M&A after Brexit. Then, this is an (uncontroversial) conclusion. You can then use it to base your hypothesis on (i.e. you expect to say less cross-border M&A after Brexit).

• Just a side note, on the other hand, there might also be incentives following Brexit that lead you to expect more cross-border M&A after Brexit (e.g. it is more difficult to navigate two institutional environments, hence, it becomes more advantageous to centralize/merge).
• I saw later that you integrate this in your theory. I think that’s good, but you can use the fact that there is some discord in the literature to contrast both visions (good vs. bad) in the introduction, and explain that your study is going to provide evidence to resolve this debate.

Your introduction is still missing a motivation of why M&A’s are important (e.g. positive effects: corporate efficiency, economies of scale, or negative effects: increased market concentration, more monopoly power/higher markup).

Literature & Hypotheses#

One additional dimension that does not seem to be there (but which you hypothesize about) is a possible asymmetry: you might expect an increase in acquisitions by EU-firms of UK-firms and a decrease for M&A by UK-firms of EU-firms. Can you find some theory and evidence on this?

H1: The Brexit leads to an increase in the volume of completed cross-border M&A deals between the UK and EU-member states, where UK-based firms are the bidding company.

H2: The Brexit leads to less profitable cross-border M&A deals between the UK and EU-member states, where UK-based firms are the bidding company.

H3: The Brexit leads to an increase in the volume of completed cross-border M&A deals between the UK and EU-member states, where EU-based firms are the bidding company.

H4: The Brexit leads to less profitable cross-border M&A deals between the UK and EU-member states, where EU-based firms are the bidding company.

Methodology#

First, you mixed up control variables and independent variables! :)

• You must also check the relative frequencies of target and acquiring firms in EU/unaffected countries, and show them in descriptive statistics.

I think you can test most of the hypotheses in the following way:

For M&A announcement $i$ when UK firm is acquirer: $$ Y_{it} = \alpha + \beta_1 \cdot \text{Brexit}_{it} + \\
\beta_2 \cdot \text{NationTargetFirminEU}_i + \\ \gamma \cdot \text{Controls}_{it} \epsilon_{it} $$

Then, the $\alpha$ would reflect $\beta_3 \cdot \text{NationTargetFirmUnaffected}_i$, i.e. the volume and profitability for mergers when the target firm is in an unaffected country.

You can also add separate dummies for each country in this regression, to control for the fact that average valuation of companies differs across countries.

When UK firm is target firm:

$$ Y_{it} = \alpha + \beta_1 \cdot \text{Brexit}_{it} + \\
\beta_2 \cdot \text{NationAcqFirminEU}_i + \\
\gamma \cdot \text{Controls}_{it} \epsilon_{it} $$

Variable definitions#

• Profitability of M&A deals

  • For public companies: both the total value created with the deal and CARs
  • For private companies: both the total value created with the deal and the ROA

• You can get event-study data if you can find the dates on which the announcements were made via WRDS to get the CARs

  • I might have a small tutorial available