The Social, Cultural and Political Factors that Influence the Level of Mergers and Acquisitions

Abstract

Abstract The aim of this paper is to analyze the cultural, social and political factors that can influence the mergers and acquisition (M&As) decision. Our study analyze if the investors perception towards investment in an economy can be influenced by these factors. The results show that social factors like public spending with health, literacy rate or people skills and abilities, cultural factors like the perception of the bureaucracy and new businesses or political factors like tax rates and democratic development are key determinants of M&As decision. These factors can be also explained in terms of investors’ behaviour in making new investments in a specific economy. Key words Mergers and acquisitions, investor behaviour, cultural factors, social factors, political factors DOI: 10.6007/IJARAFMS/v5-3/1738 URL: http://dx.doi.org/10.6007/IJARAFMS/v5-i3/1738 1. Introduction Mergers and acquisitions are becoming a strategy of choice for companies attempting to maintain a competitive advantage and to place them in front of other companies. Corporations spend a lot of money every year in pursuit of this strategy and they are in permanent search for the best transaction in order to satisfy their needs. In the present, the investors are more interest to place their capital in developing economies and are looking for a friendly business environment. A substantive body of theory and research on the role of culture in mergers and acquisitions (M&A) suggests that cultural differences between economies can create major obstacles to achieving integration benefits. Also, social characteristics of a economy can attract or in the contrary can chase away companies who are willing to use M&A transactions to invest in an economy. Besides cultural and social issues, also political factors can play an important role in attracting investments and can change the perception about an economy. As we already said above, the aim of this paper is to study whether the cultural, social and political factors of an economy can influence the number of M&A transactions in that particular state. We believe that this study is for the interest of both practitioners and academics as long as the macroeconomic environment is a main interest in all fields and finding some key elements that link this with M&As are an overall interest. Further, the study is structured as follows. In the next section we are briefly presenting the main findings of other studies in the literature. Then, the data and the empirical methodology is presented. After this we will outline the main analysis results and in the final section contains the conclusions and some directions for the future research.