Information Asymmetry in International Acquisitions: The Role of Information Institutions.

Information Asymmetry in Management Research: Past Accomplishments and Future Opportunities

“…Both aspects of institutional settings could affect elements of the conceptual framework offered in Figure 1. For example, Zhou, Anand, and Yu (2007) examined the information aspect of national institutions in the context of cross-border acquisitions. Both culture and institutional variables shed new light on an understudied aspect of our Figure 1 model: boundary conditions.…”

Acquisitions Entry Strategies in Africa: The Role of Institutions, Target-Specific Experience, and Host-Country Capabilities-The Case Acquisitions of Finnish Multinationals in Africa

“…Theoretically, the first contribution of this study is that it extends the institutional‐based view of international business by accounting for additional measures of institutions that influence acquisition entry. Formal institution is extended to include institutional transparency (Moskalev, ; Zhou et al, ) and failure in formal institutions (Al Khattab et al, ; Bremmer, ). The informal aspect of institutions is focused on the manifestation of cultural issues (contractual complexities) in acquisition decision (Jakobsen, ).…”

“…The institutional‐based view of international business strategy consists of the formal and informal institutional environment (Peng, ; Peng, Wang, & Jiang, ; Seyoum, ). For this study, the formal institutional environment has been extended to include regulatory formal institutions (Moskalev, ; Roberts, Thompson, & Mikolajczyk, ), transparency of regulatory institutions (Globerman & Shapiro, ; Zhou, Anand, & Yu, ; Organization for Economic Cooperation and Development [OECD], ) and failure in formal institutions (Al Khattab, Al‐Yatama, Al Khattab, & Aldehayyat, ; Bader & Schuste, ; Child & Marinova, ). The informal institutional environment includes, for example, the contractual difficulties rooted in cultural differences between the acquiring firm and the target firm in reaching agreement on the acquisition (Jakobsen, ).…”

“…These protections increase the likelihood for investors to acquire more equity in target firms (Moskalev, ). Zhou et al () showed that acquirers tend to choose partial acquisition in countries with poor information institutions and that partial acquisitions perform better than full acquisition in countries characterized by poor information institutions. While regulations can exist, the nontransparency of regulatory institutions to facilitate the achievement of more effective regulatory outcomes suggests that the existence of regulations allowing foreign ownership is not sufficient to increase higher foreign equity participation.…”

Determinants of equity changes in partial acquisitions of Finnish multinationals in foreign markets

“…MNEs without a previous relationship with a target firm may seek partial acquisition due to information asymmetry they face (Xu et al , 2010) as a result of differences in financial institutions that govern financial transparency and disclosure (Zhou et al , 2007) that makes assets valuation costly. Chen and Hennart (2004, p. 1128) argued that parent firms confronted with these challenges opt for partial acquisition as a means to build reciprocity or a “hostage” into acquisition contracts, something that the seller would want to avoid if the underlying assets of the firm are a “lemon.”…”