Economic Crisis, Acquisitions and Firm Performance

Cerrato, Daniele; Alessandri, Todd M.; Depperu, Donatella

doi:10.1016/j.lrp.2015.12.018

Cited by 40 publications

(43 citation statements)

References 72 publications

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“…Almost all advanced countries and most major emerging markets experienced high levels of financial stress and reduced economic activity. The effect of the crisis is captured through a dummy variable ( crisis ), which assumes a value of 1 if the acquisition was completed in the period 2007 and 2008 ( crisis period ), and 0 if the acquisition was completed outside this period (non‐crisis period) (Cerrato et al, )…”

Section: Methodsmentioning

confidence: 99%

Navigating the New Normal: Political Affinity and Multinationals’ Post‐Acquisition Performance

Hasija

Liou

Ellstrand

2019

J Management Studies

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The New Normal in the international business landscape reflects a world challenged by economic volatility and political hostilities. This suggests increased political risk, even for MNEs operating in developed markets. We use the legitimacy‐based view of political risk to examine how political affinity between host and home markets may contribute to an MNE’s post‐acquisition performance in a developed market. A high degree of political affinity signifies aligned national interests thus reducing legitimacy concerns faced by MNEs during post‐acquisition integration. Based on cross‐border M&A deals focused on U.S. targets completed by MNEs representing 45 countries between 2004 and 2012, we find that MNEs from countries with greater political affinity to the U.S. experience better post‐acquisition performance. We also investigate two country‐level factors that intensify the threat to legitimacy; the MNEs’ home market economic status and the presence of a financial crisis in the host market. Our findings indicate that political affinity mitigates risk for MNEs originated from emerging economies much more than for MNEs originated from developed economies, whereas a financial crisis reduces the benefit of political affinity.

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Section: Methodsmentioning

confidence: 99%

Navigating the New Normal: Political Affinity and Multinationals’ Post‐Acquisition Performance

Hasija

Liou

Ellstrand

2019

J Management Studies

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“…The effects of economic slowdown not only on company performance are a frequent subject of interest (Parnell et al, ; Zona, ). Reasons for different behaviour of companies are based on behavioural theory, which describes the so‐called “problemistic search” (Bromiley, ; Cerrato et al, ; Greve, ). In a period of economic slowdown and lower corporate performance, managers are looking for opportunities to maintain performance and try to correct performance deficiencies (Chen, ).…”

Section: Conceptual Debate On the Role Of Proximities In Mergers And mentioning

confidence: 99%

“…Furthermore, the intensity of M&A activity is changing over time as companies have different strategies and expectations in times of crisis and economic boom. Cerrato, Alessandri, and Depperu () distinguished risk‐avoidance and risk‐taking behaviour of firms during the time of economic crisis and emphasized limited tendencies of companies to diversify the portfolio via new cross‐border acquisitions. In other words, proximity plays role in changing economic conditions considering the behaviour of firms and intensity of acquisitions, but contributions revealing such relations are rare.…”

Section: Introductionmentioning

confidence: 99%

The variegated role of proximities in acquisitions by domestic and international companies in different phases of economic cycles

Květoň

Bělohradský

Blažek

2020

Papers in Regional Science

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This paper aims at an understanding of acquisition processes in a strongly industrialized and export-oriented economy in Central Europe. Drawing on a proximity framework and behaviour theory, the paper investigates that the geographical proximity dimension is more influential than the cognitive proximity dimension. At the same time, cognitive proximity matters more for foreign firms investing into the economy than for domestic acquisitions. While the role of cognitive proximity diminished during the economic crisis, geographical proximity keeps its importance throughout the economic cycle. Moreover, cognitive proximity has become more important for acquisitions of large companies and less for SMEs.

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“…Instead, external capital constraints imposed by the financial crisis have led diversification costs to increase more than benefits. Cerrato et al (2016) argue that performance effect of diversifying acquisitions would be less negative during the economic crisis relative to the pre-crisis period. However, they found that, in pre-crisis times, the coefficient for the performance effect of diversifying acquisitions was negative, but not significant, while during the crisis this effect was significantly negative.…”

Section: Models Of Relationship Between Diversification and Performancementioning

confidence: 99%

“…Despite the importance the environment's conditions have as contingency factors of strategic corporate decisions, there are only a limited number of studies that consider the effects that the stages of the economic cycle have on the differences in performance between these types of strategies; what's more, the few studies that do in fact consider this factor have returned contradictory empirical results (Lubatkin and Chatterjee 1991;Chakrabarti et al 2007;Kuppuswamy and Villalonga 2010;De la Fuente and Velasco 2015;Cerrato et al 2016).…”

Section: Introductionmentioning

confidence: 99%

Analysing the relationship between diversification strategy and firm performance: the role of the economic cycle

Zapata¹,

Muiña²,

García³

2019

cuadernosgestion

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The relationship between corporate strategies and firm performance has been one of the key debates in the discipline of Strategic Management. There are studies that analyse the moderating role that certain variables may play in that relationship. These variables tend to refer to aspects within the firm or, at the very least, within the competitive environment in which a firm operates. Nevertheless, the empirical evidence on the part the general environment plays from an economic perspective is much less common, and focuses on large corporations and on periods of economic growth. Accordingly, using a panel of 1,828 Spanish manufacturing firms of different sizes, an analysis is conducted of the differences in Return On Assets (ROA), Growth in Sales (GS) and Labor Productivity (LP) between specialised firms, those with related diversification, and those with unrelated diversification, between 2002 and 2011, in which there was a period of growth alternated with another one of economic recession. Although some superiority is noted of related diversification and specialisation over unrelated diversification, the differences between strategies are less significant in periods of economic recession, and vary according to the dimension of performance considered. These results reveal the need to consider the economic cycle as a contingent factor that affects the impact corporate strategies have on firm performance.

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Economic Crisis, Acquisitions and Firm Performance

Cited by 40 publications

References 72 publications

Navigating the New Normal: Political Affinity and Multinationals’ Post‐Acquisition Performance

Navigating the New Normal: Political Affinity and Multinationals’ Post‐Acquisition Performance

The variegated role of proximities in acquisitions by domestic and international companies in different phases of economic cycles

Analysing the relationship between diversification strategy and firm performance: the role of the economic cycle

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