Solving the Double Jeopardy of Cross-Border Acquisitions with Corporate Governance Bundles

Abstract

This study is focused on the associations between corporate governance of firms and value-creation in cross-border acquisitions. Studies suggest that firms prefer high economic growth and low corruption in host countries. Yet the practice of international business shows that neither fast economic growth nor limited corruption are sufficient for value-creation in cross-border acquisitions. Instead of choosing between high economic growth or low corruption, firms must strike a balance between the two. However, corporate governance studies show that top executives regularly struggle with guiding firms to successfully find that balance. We argue that these two challenges pertaining to host countries and to top executives of firms constitute a ‘double jeopardy’ that can be resolved through corporate governance bundles consisting of complementary mechanisms. Based on fuzzy-set qualitative comparative analysis of 738 cases, we developed a middle-range theory of how acquirers achieve value-creation in cross-border acquisitions by successfully resolving the ‘double jeopardy’ through well-designed corporate governance. Our results show that given strong corporate governance of cross-border acquirers, high economic growth is a necessary condition for value-creation while low corruption is not. Ours is a study that joins the dynamic stream of literature focused on the links between corporate governance of firms with performance.