Product and geographic scopes of target firm and equity control in cross‐border acquisitions: An information asymmetry perspective

Abstract

Product and geographic scopes of emerging market target firms are negatively related to extent of equity control sought by Foreign acquirers. Building on information asymmetry perspective, the current study proposes testable propositions that higher product and geographic scope of the target firm in an emerging economy exacerbate ex‐ante information asymmetry and adverse selection problems for acquirers from foreign markets and hence hinders extent of equity bought. Furthermore, we propose that acquirers’ prior experience, industry type, and ownership concentration of the target firm moderate this relationship.