Determinants of Cross-Border Mergers and Acquisitions: A Comprehensive Review and Future Direction

Kotapati Srinivasa Reddy
2015 Social Science Research Network  
The purpose of this paper is to review and summarize earlier studies analyzing the determinants of cross-border mergers and acquisitions (M&As). We primarily describe the motives of cross-border acquisitions and present the market performance for corporate control transactions over the period 1994-2013. Then, we illustrate the factors affecting cross-border investments and acquisitions in various taxonomies, namely deal-specific factors, firm-and industry-specific attributes, organizational
more » ... ning and prioracquisition experience, and country-specific factors. We draw special attention to the country-specific taxonomy for various reasons include economic and financial markets environment, institutional and regulatory framework, political situation (including corruption), tax system, accounting and valuation matters, geographical factors and cultural issues. We also provide a synopsis of earlier studies addressing the diversification motive in M&A decision. We thus propose that a host-country's institutional laws and regulatory system, accounting and tax provisions, economic performance, financial markets development, investor protection, geographical, political and cultural factors distinctly affect cross-border acquisition's completion. Lastly, we outline contemporary issues in M&A research, and suggest promising areas for future exploration. JEL Classification: G34 International business research. Krug and Nigh (2001, p. 85) found that 31% of executives had terminated after acquisition while a great extent of these executives left within two years of the deal and 75% of the top-level officials leave by fifth year of the deal. In fact, termination of executives following cross-border deals about 35%, which is significantly higher than the domestic deals about 24%.
doi:10.2139/ssrn.2685548 fatcat:lvqului6o5fmthutqtajfhux4u