Cross-Border M&A Flows, Economic Growth, and Foreign Exchange Rates

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

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Paper Title: Cross-Border M&A Flows, Economic Growth, and Foreign Exchange Rates 
 
Speaker:  Jodie Zhang, Queensland University of Technology.
 
Time and Date: 12pm -1pm, Wednesday 20 September 2023 
 
Location:  Face-to-face seminar in room CB08.08.02, Level 8, Building 8, University of Technology Sydney, 14-28 Ultimo Rd, Ultimo, Sydney, Australia (Map of campus)

Abstract: We extract expectations about future economic conditions from firms' cross-border merger and acquisition (M&A) announcements, and show they predict changes in relative economic growth rates and foreign exchange rate returns. We find the predictability is driven by the acquisition decisions of domestic firms, which signal turning points in local economic growth. The findings are motivated via a simple model of exchange rate determination with heterogeneous expectations and support the theorized relationship between foreign exchange rates and macroeconomic fundamentals. The results provide new tools for policy makers seeking to predict economic activity and offer global investors a novel source of portfolio diversification. 

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