Abstract

Purpose This study aims to examine the impact of home–host country distance on the cross-border mergers and acquisitions performance. Design/methodology/approach The results of this study are based on a final sample of 483 completed cross-border deals involving BRICS nation acquirers and targets spread across a set of 27 nations. While controlling for prior experience, among other factors, the impact of nine institutional distance dimensions on deal performance is examined. Cumulative abnormal returns calculated over the select event windows are used as a measure of deal performance. Findings The results of this study validate the explanatory power of cross-country distance and exhibit that financial and cultural distance exert a negative influence on deal performance, whereas political and global connectedness distance positively impacts performance. Interestingly, geographic distance is not found to be related to performance outcomes. Research limitations/implications The results of this study caution against possible aggregation of the cross-country distance measure and point towards the need to acknowledge and analyse the multi-dimensional nature of distance. Practical implications The results of this study are expected to aid managers in devising internationalisation strategies and target selection, maximising their performance and shareholder wealth. Originality/value This study contributes to the knowledge of internationalisation and cross-country distance. It presents as one of the first to investigate the impact of institutional distance on deal performance using a substantially large multi-country emerging market data set.

Abstract

The cultural distance between the acquiring and acquired firms is a double‐edged sword in cross‐border high‐tech acquisitions. It magnifies the ‘combination potential’ of the acquisition but also poses severe integration challenges. Scholars have highlighted that the retention of acquired CEOs in combined entities is an effective integration action to address these challenges but have generally considered it from the acquiring firms' perspective only. In this study, we also take into account the acquired CEOs' perspective and find that the permanence of acquired CEOs in the post‐acquisition organization depends on the balance between the acquiring firms' incentives to retain the acquired CEOs and the acquired CEOs' opportunity costs to remain in the company. Specifically, we argue that both sides increase with the cultural distance between the acquiring and acquired firms and that the acquired CEOs' personal characteristics and context‐specific conditions also influence this balance. We test our hypotheses using a sample of 447 cross‐border acquisitions of small high‐tech firms by large listed firms between 2001 and 2014. Our findings confirm our expectations and highlight the role of micro‐foundational characteristics in shaping the effect of key macro‐level factors on the integration of high‐tech acquisitions in international contexts.

Abstract

Mergers and acquisitions (M&As) are often dubbed as a market for lemons because of the extent of information asymmetry embedded in M&A transactions. A country’s institutional environment influences the quality and overall reliability of formal disclosures, thereby altering the extent of information asymmetry affiliated with an M&A transaction. We argue that the caliber of the host country's institutions—formal market-supporting institutions and the informal cultural institution of uncertainty avoidance—affects the public arbitration phase of M&A transactions, i.e., the phase in which firms attempt to resolve issues related to information asymmetry. We test our hypotheses using a sample of 3376 foreign acquisitions completed by U.S. firms between 2006 and 2016. Our results indicate that formal institutions lower arbitration duration. But, while high uncertainty avoidance lowers duration as expected for countries with low market-supporting institutions, it more strongly raises the duration for countries with high market-supporting institutions.

Abstract

We study the role of cultural distance in the choice of payment method in cross-border acquisitions. Our results based on French acquirers show that cultural distance increases the likelihood of payment in cash, which is not the case of geographical distance and linguistic difference. We also find that the most significant dimension of culture is uncertainty avoidance and that cultural distance matters most when integration of the target into the acquirer’s organizational structure is expected to be challenging. These results suggest that cash payment is a means to achieve greater control over the target, particularly when the risk of dissent is high.

Abstract

Our study enhances comprehension regarding the motivations behind cross-border acquisitions (CBMA) by Emerging Market Multinationals (EMNEs). This research explores the impact of both formal and informal institutional distance on equity ownership in emerging markets. Additionally, we posit that these direct correlations are more pronounced for EMNEs compared to Multinational Enterprises (MNEs). To validate these hypotheses, we compare the CBMA of firms based in developing countries with those in developed countries. Motivated by the need to better understand a prominent group of foreign acquirers, we examine acquisitions initiated by EMNEs over a 12-year period. We observe that acquirers from developing countries tend to hold greater equity share in targets located in more economically advanced nations, sharing cultural proximity. Our study’s empirical findings highlight the differential impact of economic distance on the equity share sought by acquirers based in emerging markets, contingent upon the level of government efficiency. Specifically, we note that this relationship shifts from a linear correlation in instances of low government efficiency to a curvilinear association in situations of high government efficiency. While the cultural distance seems to have a greater adverse effect on the degree of ownership taken in acquisitions for EMNEs compared to Emerging Market Multinationals (DMNEs). It lends support to the position that the context of institutions, and institutional theory, matter.

Abstract

Several studies on cultural clusters classify Japan as independent, meaning that wherever Japanese firms go abroad, they must adapt to very different environments. This study examines how Japanese firms treat deterrent effects of geographic distance, cultural distance, and political hazards and whether the deterrent effects may vary with firm size, firm age, and ownership solution. Results using data on Japanese firms' outbound mergers and acquisitions (M&A) from 2010 to 2019 reveal that (1) only the deterrent effect of geographic distance is absolute. (2) Larger firms with larger slack resources in their home country are less concerned about geographic distances and political hazards. (3) Older firms, exposed to typical practices and norms for a long time, are less adaptable to cultural distances. (4) The deterrent effect of geographic distance is weaker for complete control mode on the one hand, on the other hand, the moderating effect of complete control mode on political hazards hinges on firm size and age due to trade‐offs between integration benefits and resource/experience constraints.

Abstract

Drawing upon a dataset of cross-border mergers and acquisitions (M&A) events of Chinese enterprises from 2010 to 2017, this study investigates the impact of corporate social responsibility (CSR) on the completion of cross-border M&A with a focus on the moderating role of institutional distance. The results highlight the significance of CSR on the completion of cross-border M&A. The robustness tests including changing estimation model, new measurements, propensity score matching, and instrumental variable tests show that the main results are consistent. Second, both formal and informal institutional distance have positive moderating effects of CSR on the completion of cross-border M&A.

Abstract

During the pre‐merger phase of an acquisition, fundamental decisions are made concerning whether to buy, which company to buy, and how much to pay. Further, acquisitions carry significant firm‐wide implications requiring input from multiple different specializations, and hence, they are the product of the judgements, decisions, and social interactions between top managers. We focus our theory development on a pivotal yet under‐researched top management team characteristic, transactive memory system (TMS). TMS is the shared division of cognitive labour with respect to encoding, storing, and retrieving knowledge from individual areas of expertise. We theorize that TMT transactive memory directly influences the strategic decision making process, which in turn determines acquisition performance. We test our hypotheses with a sample of 109 acquisitions, combining survey and archival data. We find that TMT transactive memory increases reliance on expert intuition and procedural rationality, while reducing political behaviour; and each of these three strategic decision processes carries different implications for acquisition performance. Our study advances theory by explaining the team‐level behavioural mechanisms that underlie acquisition performance.