Shareholder wealth effects of cultural diversity among blockholders: Evidence from cross‐border acquisitions by U.S.‐listed companies

Abstract

Research question/issue: This paper studies whether and how diversity among blockholders in their cultural preferences may affect short-term shareholder wealth.Blockholders often hold diverse objectives, leading to principal-principal (PP) conflicts in cross-border acquisitions (CBAs). The literature, however, is unclear on whether they have diverse cultural preferences when it comes to the location choice in CBAs and, if so, how such diversity affects short-term shareholder wealth surrounding the announcement of a CBA. Integrating agency and resource dependence perspectives, this paper argues that such diversity has an inverted U-shaped relationship with shareholder wealth. Research findings/insights: The theory is tested using a sample of 2,571 nonfinancial CBAs made by U.S.-listed companies between 2002 and 2014. Results suggest an inverted U-shaped relationship between diversity in host-market cultural distance propensities among five types of blockholders (family, corporations, bank and insurance companies, resistant financial institutions, and government) and the cumulative abnormal returns (CARs) attributable to CBA announcements. Theoretical/academic implications: First, international corporate governance scholars should understand the nonfinancial motivations of shareholders when evaluating potential conflicts in internationalization strategy and performance. Second, future studies should recognize that PP issues in the multinational firm are a multidimensional construct, composed of multiple sources of conflicts beyond the traditional focus on controlling-versus-minority shareholders. Lastly, the PP literature should shift its rhetoric from conflicts to a good balance between benefits and conflicts, depending on the degree of heterogeneity among principals.Practitioner/policy implications: An optimal ownership structure may involve moderate diversity among blockholders in their nonfinancial preferences. This optimal level should bring in diverse resources and perspectives from different blockholders, while keeping coordinating costs moderate for aligning different goals of these blockholders.

Revisiting the association between environmental performance and financial performance: Does the level of environmental orientation matter?

“…Following recent studies (Carpenter et al, 2019; Chen, 2019), we utilize the one‐digit Standard Industrial Classification (SIC) code to compose our sample. We first gather environmental performance scores for all US firms in the Thomson Reuters Asset4 ESG database.…”

“…Following recent studies (Carpenter et al, 2019;Chen, 2019) Note: This table presents the Asset4 environmental performance score (ENV) and the scores of its subdimensions, namely environmental emission reduction (ENER), environmental product innovation (ENPI) and environmental resource reduction (ENRR) for the US firms in each year from 2002 to 2017. Firms with limited assets (total assets < $100 M) and limited sales (net sales < $50 M) are excluded from the sample.…”

Determinants of commitment and opportunism of institutional investors’ behaviour: an empirical investigation on Robo-voting Phenomenon

“…), we should probably be careful not to attribute the same 'stewardship tendencies' to all of them. We should rather consider that different types of institutional investors have heterogeneous preferences (Hoskisson et al, 2002;Chen, 2019). For example, according to Brickley et al (1998), it is possible to divide institutional investors into pressure-sensitive institutional investors and pressure-tolerant institutional investors.…”

Has the Product Patent Regime Impacted Mergers and Acquisitions? Unveiling with a Systematic Literature Review

“…The economic connotation of ‘value’ is the desirability of objects and it has taken various meanings over the years (Graeber, 2001) and the present review expresses it as shareholder’s value’ (Kiesel et al, 2017). Studies have examined the impact of M&A on the shareholders’ value creation using measures such as earning per share, operating performance and cumulative abnormal returns (CAR) (Chen, 2019). The research to understand value-creation for the shareholders from M&A has been concentrated mainly in the USA or Europe where it has been in practice for long (Alexandridis et al, 2017; Chaudary & Mirza, 2017; Tampakoudis et al, 2018).…”