Determinants of Cross‐Border Mergers and Acquisitions

Abstract

The vast majority of cross-border mergers involve private firms outside of the United States. We analyze a sample of 56,978 cross-border mergers between 1990 and 2007. We find that geography, the quality of accounting disclosure, and bilateral trade increase the likelihood of mergers between two countries. Valuation appears to play a role in motivating mergers: firms in countries whose stock market has increased in value, whose currency has recently appreciated, and that have a relatively high market-to-book value tend to be purchasers, while firms from weaker-performing economies tend to be targets.

Mergers and Acquisitions in Latin America: Industrial Productivity and Corporate Governance

“…A particular study that is in line with our research is Erel, Liao and Weisbach (2012), who employed a gravitational model at the country level and found that the geographical distance, the quality of accounting information, and the level of bilateral trade are among some of the determinants of M&As activity between two countries. Additionally, the authors argue that it is likely that institutional characteristics at the country level are positively correlated with better corporate governance.…”

“…Furthermore, the authors that have applied the gravitational model to transnationals M&As, have always done so at the country level (Di Giovanni 2005;Erel, Liao, and Weisbach 2012;Head and Ries 2008;Hyun and Kim 2010;Portes and Rey 2005). 1 Finally, we measure industry productivity for each factor of production.…”

Institutional Investors and Cross-Border Mergers and Acquisitions: the 2000-2012 Period

“…Bris and Cabolis (2008) further find that shareholder protection and accounting standards in the acquirer's country is positively related to the merger premium in cross-border M&As. Erel, Liao, and Weisbach (2012) extend their sample to include not only public firms but also private firms. They find that the likelihood of cross-border M&As is related to geography, the quality of accounting disclosure, bilateral trade, and stock valuation.…”

“…Fourth, while previous studies use either Tobit or Ordinary Least Squares (OLS) regressions to examine the determinants of the volume and intensity of cross-border M&A activity (e.g., Rossi and Volpin, 2004;Ferreira et al, 2010;Erel, Liao, and Weisbach, 2012), I show that Zero-Inflated…”

“…Previous studies (e.g., Rossi and Volpin, 2004;Ferreira et al, 2010;Erel et al 2012) measure the intensity of cross-border M&A activity by comparing the number of cross-border M&As with the number of domestic M&As in a target country. This ratio refelcts the likelihood of a merger in a country that involves a foreign acquirer.…”