Cross-border Mergers And Acquisitions Research Articles

Deal or no deal for mergers and acquisitions

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Companies typically face considerable barriers when embarking on cross-border mergers and acquisitions (CBMAs). By exploiting past takeover experiences and conducting effective due diligence during the pre-deal stage, acquiring firms become better positioned to overcome barriers such as those associated with cultural and institutional divides. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

The role of cities in cross-border mergers and acquisitions — Evidence from China

This study explores the impact of an international friendship city, serving as diplomatic relations between cities, on the transaction time and equity ownership choice in cross-border mergers and acquisitions (CBMAs). Analyzing data from Chinese firms spanning the period 2001 to 2019, we discover a positive and significant correlation between the establishment of an international friendship city and shorter CBMAs duration and higher CBMAs share of equity. Further evidence suggests that the effect is more pronounced (a) in target countries that keep cooperative partnerships with China, (b) countries along the Belt and Road, and (c) state-owned enterprises (SOEs) acquirers. In addition, we identify effects at the provincial level, demonstrating a correlation between the number of international friendship cities and positive outcomes. Mechanism tests show that the subnational-level friendship relationship consolidates cultural exchange and lessens institutional barriers, thereby reducing the completion time and raising the ownership of acquirers. Drawing on political perspective, our results provide new insights into the important role of friendly diplomatic relations to cross-border investment for enterprises internationalization.

The Influence of Foreign Directors on Cross-Border M&A Completion

Purpose - The purpose of this study is to empirically examine the influence of foreign directors on the likelihood of cross-border merger and acquisition (CBMA) deal completion, and to investigate the moderating effect of past M&A experience. Despite the significant influence that board diversity can have on M&A decisions and its role as a decision-maker, insufficient research has been conducted on the impact of boards on M&A completion. Foreign directors, as a representative proxy for board diversity, can bring broader perspective and knowledge about a foreign environment when firms pursue CBMAs. In addition, they can provide strategic advice and counsel to a firm by objectively evaluating the information necessary for the processing of CBMAs, thereby enhancing the quality of CBMA decision-making. This study expects that the resources that foreign directors possess may have a positive influence on the CBMA process, improving the acquirer’s ability to find a more suitable target and reducing country differences that may arise during the negotiation process. Moreover, the study also expects that this effect is strengthened within an acquirer that has prior M&A experience since the firm can gain knowledge and accumulate the capabilities essential to pursuing subsequent M&As. Design/Methodology – Using a sample of 460 CBMA deals conducted by 377 publicly listed Chinese acquirers between 2009 and 2017, we employ logistic regression to examine our hypotheses. The study utilized the dummy variable of whether a CBMA deal is completed as the dependent variable, foreign directors on board of directors as an independent variable, and past M&A experiences as moderating variables. Findings – The study shows the positive role of foreign directors within an acquirer in enhancing the likelihood of CBMA deal completion. Additionally, the result also shows that the acquirer’s past M&A experience positively moderates the influence of foreign directors on the likelihood of CBMA deal completion. Originality/value – The study emphasizes that the international experience and knowledge brought by foreign directors to underwriting firms in pursuing and executing CBMA deals, characterized by high uncertainty and risk, can effectively mitigate these challenges.

A Comparative Policy Analysis for Cross-border M&A between China and Africa that Advances China's Leading Position in Mining

China is still looking for resources and has recently engaged in aggressive cross-border M&A in the mining industry. Per China's 14th Five-Year Plan, the resource plan builds the foundation of China's rapid industrial development and growing economy. In recent years, it has been observed that acquisitions are focusing more on emerging markets' resources, such as Africa. Despite the negative effect of the pandemic, which cooled down cross-border mergers and acquisitions (CBMAs) in the mining industry, mining M&A's strategic importance to global industrial development makes it a major area of study. This phenomenon of mining M&A becoming China's story is closely related to economic policies and regulations in China and Africa. Hence, this article develops a comparative analysis of the different procedures in China and critical geographies in Africa that affects China's unceasingly expanding mining industry through acquisitions in Africa. Through comparative research analysis, we find that Chinas One Belt One Road Initiative (BRI) promotes CBMAs and investments in Africa and reduces operational barriers in policies and technology. The CBMAs success relies on a thorough understanding of local rules, major players, and legal policies in both nations. African countries have worked to improve their mining codes and raised their devotion to ESG to attract foreign investments. The inference is that Africa still possesses a great untapped potential for Chinese investors in the mining sector who understands the local market realities and can alleviate risks.

Cross-border mergers and acquisitions by emerging country banks: What do acquisition premiums tell us?

Our knowledge of international expansion motives and strategies of emerging country banks (ECBs) is limited. Using a worldwide sample of cross-border mergers and acquisitions (CBMAs) and a mixed model, we explore firm- and country-level determinants of acquisition premiums. We show that the effects of target bank and target country characteristics on premiums are contingent on the acquirer’s home country: emerging vs. advanced. More specifically, compared to advanced country acquirers, ECBs pay lower premiums for targets that are: (i) more efficient; (ii) offering better functional diversification opportunities; and (iii) based in markets with higher growth prospects or better institutional development levels. Furthermore, state-owned ECBs pay higher premiums. Our findings suggest that CBMAs undertaken by ECBs might not be motivated by competence-enhancing strategies while being less sensitive to the target country’s institutional development.

Navigating political risk: Protectionism and ownership strategy in cross-border M&As

Rising protectionism sentiment has led to increased scrutiny of cross-border mergers and acquisitions (CBAs). Informed by the legitimacy-based view, we posit that heightened protectionism in the host countries triggers legitimacy concerns towards foreign firms and presents a political risk that influences foreign acquirers’ ownership strategy in CBAs. Analyzing CBAs in the recent decade, we find that foreign acquirers tend to acquire greater ownership stakes to mitigate the political risk associated with protectionism. Further, bilateral relationships between the host and home countries involved in CBAs regarding economic dependence, political animosity, and social interactions linked to migration have differential moderating effects either easing or intensifying legitimacy concerns.

Managers as the bridge: How cultural friction influences the integration of cross-border mergers and acquisitions

Going beyond cultural distance, the present study adopts a more contextualized view of cultural friction to account for the “actual cultural contacts” in cross-border mergers and acquisitions (CBMAs), and meanwhile builds a case-based measure of cultural friction to quantitatively capture the country- and deal-level cultural differences between the acquirer and the target in each CBMA. Differing from the existing research that takes the influence of cultural differences on CBMA performance for granted, we highlight the importance of managers from the acquiring firm by theorizing that cultural friction between the acquirer and the target can shape acquiring managers' choice of managerial practices to complete the managerial tasks during integration, leading to different performance. In particular, we postulate a curvilinear relationship between the cultural friction and CBMA performance. By incorporating regulatory focus theory into our analytical framework, we further hypothesize how this curve is shaped by managers’ regulatory focus, a key motivational trait at the firm management level. Using a sample of 304 completed CBMAs conducted by Chinese listed firms, our empirical results verify the U-shaped relationship between cultural friction and the CBMA integration performance, and suggest that this relationship is flattened by acquiring managers’ prevention focus.

Top-tier advisors and the market feedback dynamics in cross-border M&As

We provide evidence that the presence of top-tier advisors increases managers' propensity to withdraw from cross-border mergers and acquisitions (CBAs) with poor market returns around the announcement. This effect is stronger for private target acquisitions, in which information asymmetry is expected to be more pronounced, and smaller bidders, who are likely to lack the expertise required to process information themselves. This suggests that managers assisted by reputable investment banks consider negative market feedback in informationally challenging deals. Our results are robust to several endogeneity tests. We provide novel inferences about the informative role of stock markets in shaping advisory roles in respect of M&As.

Chinese cross-border acquisitions: stylised facts and new directions

PurposeChinese multinational enterprises’ (MNEs) unprecedented, aggressive cross-border mergers and acquisitions (CBMAs) have led to several studies examining Chinese CBMAs, which importantly has also led to some degree of “theorising”. This study aims to undertake a “non-theoretical” fact-finding exercise before any theorising and empirical “causal” examination for a better understanding of the phenomenon (the rise of Chinese CBMAs).Design/methodology/approachThis study uses a “stylised facts” approach which documents “empirical regularities” concerning Chinese CBMAs and thus guides new research questions.FindingsSeveral facts are documented. Firstly, both the value and frequency of Chinese CBMAs are catching up to greenfield investments, with CBMA deals being larger in scale but lower in frequency. Secondly, Chinese CBMAs show a global reach away from the regional orientation of their early years. Thirdly, Chinese MNEs are possibly transforming their value chain with industrial upgrading as an aim. Fourthly, Chinese “full” acquisitions of targets have surged, especially in OECD countries, suggestive of Chinese MNEs’ “radical” acquisition approaches.Originality/valueThe gathered facts lend support to the view of the need for such fact-finding exercises to explicate and shed “new” light on the phenomenon (beyond our “current” views/beliefs). An understanding of the underlying trends beyond bare facts can also identify new knowledge, which can in turn provide new directions for research.

Chinese SOEs and the Completion of Cross-border M&As: The Moderating Role of M&A Experience

Purpose – The purpose of this study is to investigate the relationships among Chinese state-owned enterprises (SOEs), previous M&A experience, and the probability of deal completion in cross-border mergers and acquisitions (CBMAs). Since Chinese SOEs tend to be recognized by host countries as agents of their home country government, this study argues that SOEs will face difficulties in completing CBMA deals. However, the study expects that these difficulties may vary depending on whether the firm has previous M&A experience because firms can gain the knowledge and capabilities necessary to implement subsequent M&As successfully from past M&A experience. Design/methodology – To investigate our argument, we conduct a logistic regression using a sample of 363 CBMA deals from 304 Chinese publicly listed firms during 2007 to 2017. We used SOEs as an independent variable, experience of domestic and foreign M&As as moderating variables, respectively, and CBMA deal completion as the dependent variable. Findings – The study shows a negative and significant relationship between Chinese SOEs and the completion likelihood of CBMA deals. We find that this negative relationship is strengthened when the firm had prior domestic M&A experience, whereas foreign M&A experience alleviated the negative relationship. Originality/value – The issue of government ownership has remained unclear since government intervention has both advantages and disadvantages in pursuing CBMAs. Our findings support literature that argues Chinese SOEs face legitimacy concerns in the host countries, thereby lowering their CBMA deal completion likelihood. Furthermore, the study enriches the literature by identifying different moderating effects of domestic and foreign M&A experience on the negative relationship between SOEs and CBMA deal completion.

Is India a pollution haven? Evidence from cross-border mergers and acquisitions

A crucial component of the combating climate change is the reduction of carbon emissions (CO2). Based on the pollution haven hypothesis, existing literature claims that to mitigate the carbon emissions, multinational enterprises undertake cross-border mergers and acquisitions (CBA), a form of foreign direct investment, in emerging economies where the regulatory institution is weak and make such host countries a pollution haven victim. In this background, we examine whether India is potentially a pollution haven for firms who prefer the CBA route by investigating the impact of the home country's CO2 emissions on CBA decisions involving the number, volume, and stake acquired in an emerging host country, India. Additionally, we use India's corruption control as an indicator of institutional factor to examine its moderation effect. We used a net sample of 796 country-pair-year observations to examine the volume and number of CBA and 3796 net deal-level data to examine stake acquisition from a gross sample of 5641 CBA data sourced from the Thomson Reuters EIKON database covering a study period from 1990 to 2020. Our results from Negative Binomial and Tobit regression models find that less carbon-emitting countries frequently undertake CBA activities with large volumes in India. Moreover, our Logit regression model results show that high emitting country firms prefer full equity control in Indian firms. Furthermore, India's corruption control makes this relationship much more potent by significantly moderating the impact of the home country's CO2 emissions on CBA decisions. These results indicate that India could become potentially a pollution haven for multinational enterprises from high emitting countries. Furthermore, we provide specific policy implications based on these results and add scientific value to the academic community, scholars, environmentalists, regulatory bodies, and policymakers.

Optimal Decision-Making in Chinese Cross-Border Mergers and Acquisitions: A Perspective of Overbidding

Chinese domestic firms engage actively in the cross-border merger and acquisition (CBMA) markets, which are crucial in China’s foreign investment economics. Acquisition premium has attracted stakeholders’ attention to determine whether the CBMA decision is optimal. This study employs a novel model to assess decision-making efficiency by overbidding based on a profit maximization assumption. Based on the Chinese CBMA transaction data from 2009 to 2019 of Chinese acquiring firms, the descriptive analysis indicates the widespread overbidding phenomenon in Chinese CBMAs. Moreover, empirical findings reveal that SOEs (vs. non-SOEs) experience less overbidding among acquiring firms. This study also shows that firms from the high-tech industry tend to be less overbidding (more efficient) in the CBMAs’ setting. The findings may have policy implications for China’s outward investment efficiency.

Intellectual Capital in Cross Border Mergers & Acquisitions: An Exaptation Perspective

Exaptation, in internationalization, is defined as the re-use of capabilities that a firm developed through domestic geographical dispersion in the process of cross border mergers and acquisitions (CBMA). This study tests the impacts of exaptation with a firm’s first and subsequent cross border mergers and acquisition engagements. The study is based on the 10 years of data from 2009 to 2019 of 99 manufacturing sector companies of Malaysia to test the relationship between the firm’s domestic geographical dispersion and chances to engage in first-time and subsequent CBMA. We applied pooled regression to estimate hurdle models. The results showed a positive and statistically significant influence of exaptation of control and coordination capabilities on the firm’s probability of engaging first-time cross-border mergers and acquisitions; however, these capabilities become irrelevant in subsequent CBMA involvement. The findings imply that firms operating in geographically dispersed business units can have higher chances of success in cross border mergers and acquisitions.

Cross-Border M&As and Green Innovation among Emerging Market Multinationals: Evidence from China

The reverse spillover effect of the foreign expansion of multinational enterprises (MNEs) from emerging economies (EMNEs) on their green innovation in home countries have been largely ignored; by contrast, the main focus has been directed toward the spillover effect of MNEs from developed countries in emerging economies. The only related research available limits their analysis to the regional level, rendering the relationship between the foreign expansion of EMNEs and their green innovation unclear. Specifically, as an increasing foreign expansion strategy adopted by EMNEs, how do cross-border mergers and acquisitions (CBMAs) affect the post-merger green innovation of EMNEs? To examine this question and explore the boundary conditions, this study integrates institutional theory and the business ethics literature to construct a motivation–ability framework in the context of green innovation. Using the Propensity Score Matching with Difference-in-Difference (PSM–DID) method, we tested our hypotheses on a sample of Chinese listed manufacturing firms between 2009 and 2017. Results suggest that Chinese MNEs decrease their green innovation in response to CBMAs. Moreover, the CBMA–green innovation relationship varies across firms and is determined by heterogeneity in state ownership, government subsidies, and industry openness. These findings not only elucidate the reverse effect of the foreign expansion of EMNEs on their green innovation in home countries; they also provide an approach to reconciling mixed conclusions on the relationship between CBMAs by EMNEs and their innovation performance by clarifying types of innovation in international business research.

The Role of Political Institutions of Emerging Multinational Economies’ Cross-Border Mergers and Acquisitions in the OECD Countries

Cross-border mergers and acquisitions (CBMAs) have experienced a phenomenal growth. This is partly fueled by the continued development of multinational enterprises (MNEs) in developed economies (DEs). This empirical study investigates the role of political institutions in location choice regarding CBMAs in the emerging multinational economies (EMNEs) of OECD countries. Using the six-dimension framework of WGI indicators, we examine the relationship between the political environment in the host/home countries and EMNEs’ CBMAs in the organization of economic co-operation and development in OECD countries. The empirical results indicate that EMNEs escape tight political control and weak regulatory framework in the home country compared to DEs. Violent and unstable investment environments impede domestic development, and more exporting activities occur. The results confirm that emerging economies (EEs) should improve the quality of institutions to increase outward CBMAs. Meanwhile, DEs should make full use of open and market-friendly policies to attract more inward CBMAs.

Determinants of target location selection for acquirers in the manufacturing sector: Pollution intensity, policy enforcement, and civic environmentalism

This study tests the pollution haven hypothesis to identify the determinants of target location selection in cross-border mergers and acquisitions (CBAs). Under the pollution haven hypothesis, it argues that the high pollution intensity of the acquirer’s industry in the manufacturing sector makes acquirers more likely to select target countries with relatively lax environmental policies than those in the home country to gain location-specific advantages. This effect is more substantial with increased home-country government-policy enforcement but weaker with increased host-country civic environmentalism. Using 3,087 completed CBAs (2001–2013) from 49 acquirer countries, we find evidence that supports the pollution haven hypothesis.

Three decades of research on cross-border mergers and acquisitions: A literature review and future research agenda

This study reviews 191 empirical articles published from 1990 to 2020 in A* and A category journals recognized by the Australian Business Deans Council (ABDC). We adopt the theories-contexts-characters-methods (TCCM) protocol to review and present the consolidated findings and set future research agendas in cross-border mergers and acquisitions (CBA) activities. Our review findings suggest that scholars have used institutional theory consisting of the formal and informal institutional framework, resource-based view, macro economic theory, information asymmetry, agency theory, ownership, location, and internalization (OLI) framework, and multi-theoretical framework covering transaction cost economics, information cost, real options theory, knowledge-based view, organization learning theory, and likewise related antecedents in the CBA research. Most of the existing knowledge is either from developed markets or global markets, and at a rapid pace, scholars are investigating emerging markets’ outbound CBA activities.

Economic policy uncertainty and cross-border mergers and acquisitions

We examine the effects of economic policy uncertainty (EPU) on cross-border mergers and acquisitions (CBAs). The results show that a higher degree of EPU at home retards the number and volume of inbound CBA deals. However, this effect is positively moderated by the host country’s better quality of institution, business environment and political risk. The bilateral acquirer-target country-pair investigation reveals that while higher EPU in the target’s domicile deters inbound CBAs, higher EPU in the acquirer’s nation is positively associated with a higher number and volume of outbound CBA deals. Finally, on the announcement of the deals, targets (acquirers) based in countries with a larger increase in EPU are associated with lower (more) stock returns than the targets (acquirers) based in countries with a smaller increase in EPU. These findings imply that countries aiming to attract cross-border investments should strive to mitigate economic policy-related uncertainties.

Corporate Governance Spillover through Bootstrapping and ASEAN Bidder CBMA Success

This study aims to examine whether the difference in country-level corporate governance between ASEAN bidding and the target country could explain the performance change (Tobin’s Q) following a Cross-border merger and acquisition (CBMA); hence, the CBMA success. Using 142 CBMAs involving ASEAN firms as the bidder over the period 2002 to 2013, the study found that the difference in country-level corporate governance could result in corporate governance spillover through bootstrapping. This has resulted in the improvement of ASEAN bidder corporate governance and positively affected the CBMA success. However, the improvement must be large enough to outweigh the high acquisition cost.

Multicultural leaders from emerging markets: transforming international acquisitions and corporate social responsibility

PurposeThe purpose of this paper is to explore the influence and advantages of leadership multiculturalism on global strategy development through cross-border mergers and acquisitions (CBA) and corporate social responsibility (CSR) from emerging market multinational companies (EMNCs) expanding into emerged markets. The key contribution of asymmetric multiculturalism is a novel finding based on inductive research. We fill a gap by further linking business leader characteristics and corporate strategic actions and examining how multicultural business leaders from emerging markets can be highly effective at CBA and CSR.Design/methodology/approachThe paper draws on in-depth interviews, observations and documentary evidence analyzed with iterative coding, construct definition and thematic development to understand how leadership multiculturalism affects CBA and CSR in an EMNC over time.FindingsThe new construct of leadership asymmetric multiculturalism describes strategic advantages accruing to leaders from developing markets who are culturally fluent in both emerging and emerged market milieus. The construct contributes to emergent research on the rise of multicultural leaders and their strategic advantages and delineates a pathway toward identifying advantages of emerging over emerged market business leaders.Research limitations/implicationsThe research addresses specific CBA and CSR strategies within one emerging market region and EMNC. Future research should further articulate and validate the key construct of asymmetric multiculturalism, further examine its sources, draw more explicit comparisons with data from emerged market leaders, and explore the applicability of these findings to strategic actions and advantages in both emerging and emerged markets.Practical implicationsEmerging market corporate leaders should identify and develop pertinent aspects of their own asymmetric multiculturalism in enacting CBA and CSR strategy with respect to EMNCs and firms from developed markets. Emerged market leaders should become more aware of and cultivate their own multiculturalism.Social implicationsAsymmetric multiculturalism can be accompanied by heightened awareness of global citizenship — including codes of ethics, environmental challenges, community outreach and fair labor practices — which, in tandem with CBA, can strengthen emerging market firms’ performance and reinforce their global stature and reputation.Originality/valueAsymmetric multiculturalism is a new explanatory construct in the sociological, economic and management disciplines. Emerging markets corporate leaders utilize their multicultural competence to accelerate global CBA and CSR activity and advance strategic opportunities for their firms. The identification of advantages deriving from emerging market leadership capabilities is an unusual finding given the more typical emphasis on the privileges of emerged market leaders and firms.