Sympathy as a Determinant of Cross-Border Merger Activity

Abstract

This paper introduces cross-country sympathy as a determinant of cross-border merger activity. We use abnormal votes exchanged between countries in the Eurovision Song Contest between 1999 and 2013 to proxy for sympathy across countries. We find that pairs of countries sharing high sympathy levels experience high levels of cross-border merger activity, while pairs of countries sharing low levels of sympathy exhibit low cross-border merger activity. Sympathy subsumes the significance of culture as a determinant of cross-border merger activity. We find that the relation is driven by private-to-private acquisitions rather than public-to-public merger deals, showing that managers of private firms are influenced more by sympathy.