Trust and cross-border mergers and acquisitions |
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| Institution: | 1. Department of Mathematics and School of Economics and Management, University of Bologna, Bologna, Italy;2. Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy;3. Department of Economics, University of Bamberg, Germany;1. Department of Accounting and Finance, Lancaster University, UK;2. Glorious Sun School of Business and Management, Donghua University, China;3. International College, Renmin University of China, China;1. School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou, China;2. Department of Planning and Finance, Wenzhou Medical University, Wenzhou, China;3. School of Mathematical Sciences, Wenzhou-Kean University, Wenzhou, China;1. College of Economics and Management, Nanjing University of Aeronautics and Astronautics, China;2. Business School and International Research Centre for Sustainable Finance, Ningbo University, China;3. School of Economics, University of Nottingham Ningbo, China;4. Chinese Academy of Finance and Development, Central University of Finance and Economics, China;1. School of Accounting, Zhongnan University of Economics and Law, 182 Nanhu Avenue, Wuhan, China;3. School of Accountancy, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai, China;4. Research Center of Finance, Shanghai Business School, 123 Fengpu Avenue, Shanghai, China |
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| Abstract: | A number of studies suggest that social trust matters for investment. Using different measures of trust from World Values Survey, we show that countries where people display higher levels of trust engage in more cross-border M&A activities. When they do, these acquirers pay lower premiums. To the extent that these acquirers also tend to engage in larger acquisitions as well, our findings suggest that a larger selection pool of potential targets and higher value targets enable these acquirers to negotiate for lower premiums. We do not find evidence of the significant effect for target country trust levels. Hence, trust may benefit those acquiring firms in cross-border transactions. |
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